Confucian culture and the choice of high-quality auditors

Zhiying Hu, Weiyan Zeng and Yuyu Zhang

Managerial Auditing Journal, 2025, vol. 40, issue 6, 761-797

Abstract: PurposeThe purpose of this study is to investigate how Confucian culture influences the selection of higher-quality auditor selection in Chinese listed companies.Design/methodology/approachUsing data from Chinese listed companies from 2003 to 2020, this study examines the relationship between Confucian culture and auditor selection. This study explores mechanisms such as social trust and moral self-discipline, information disclosure quality and mitigation of Type II agency problems (i.e. tunnelling). The authors conduct cross-sectional analyses to assess the moderating roles of corporate governance and international cultural influences.FindingsConfucian culture significantly influences the selection of high-quality auditors, with this effect mediated by social trust, moral self-discipline, better information disclosure and less Type II agency problems (i.e. tunnelling). The association is stronger in firms with robust corporate governance and interacts positively with foreign cultural factors to enhance high-quality auditor selection. When firms do not choose Big 10 auditors, firms guided by Confucian ethics strategically prioritize industry specialists to maintain audit quality.Originality/valueThis study contributes to the literature by applying imprinting theory, agency theory and signaling theory to explain how Confucian culture, as an informal institution, influences corporate governance decisions. This study highlights the multiple channels through which cultural values shape auditor selection. By examining how informal institutions complement formal governance practices, the findings of this study provide practical insights for corporate leaders, auditors and policymakers, emphasizing the significance of cultural values in enhancing audit quality and ethical business standards.

Keywords: Confucian culture; Auditor choice; Trust; Corporate governance; Informal institutions (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eme:majpps:maj-04-2024-4293

DOI: 10.1108/MAJ-04-2024-4293

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