The Effect of Auditing on Promoting Exports: Evidence from Private Firms in Emerging Markets

C. S. Agnes Cheng, Weihang Sun (), Kangtao Ye () and Ning Zhang ()
Additional contact information
C. S. Agnes Cheng: School of Accounting and Finance, Hong Kong Polytechnic University, Kowloon, Hong Kong
Weihang Sun: School of Accountancy, Shanghai University of Finance and Economics, 200433 Shanghai, China
Kangtao Ye: School of Business, Renmin University of China, 100872 Beijing, China
Ning Zhang: Smith School of Business, Queen’s University, Kingston, Ontario K7P 0H7, Canada

Management Science, 2020, vol. 66, issue 4, 1692-1716

Abstract: We investigate the effect of auditing on promoting exports for private firms in emerging markets. Using a sample of private firms from 125 countries between 2006 and 2015, we show that firms that have their financial statements audited have more exports than firms that do not have their financial statements audited. To infer causality, we employ a regression discontinuity design (RDD). Using the discontinuity around the mandatory financial audit threshold, we find that firms slightly above the threshold have more exports than do firms that are slightly below the threshold. We also exploit the countries with exogenous regulation shocks to the mandatory audits. Using the difference-in-differences (DiD) design, we find that firms that are exempted from mandatory audits have less exports subsequent to the regulation change. Further analyses reveal that the effect of auditing is more pronounced in countries with higher audit quality and for firms with limited alternative information. Our findings suggest that the auditing function promotes exports—an important economic consequence for the global economic development.

Keywords: audit; international trade; private firms; emerging markets; regression discontinuity design (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

Downloads: (external link)
https://doi.org/10.1287/mnsc.2018.3254 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:66:y:2020:i:4:p:1692-1716

Access Statistics for this article

More articles in Management Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().