The Effects of Management Demography on Auditor Choice and Earnings Quality: Evidence from China

Louis T. W. Cheng () and T. Y. Leung ()
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Louis T. W. Cheng: School of Accounting and Finance, Hong Kong Polytechnic University, Office M822, Li Ka Shing Tower, Hong Kong
T. Y. Leung: Department of Accountancy, City University of Hong Kong, Hong Kong

Review of Pacific Basin Financial Markets and Policies (RPBFMP), 2012, vol. 15, issue 02, 1-37

Abstract: Recent management literature shows that demographic characteristics of top management and corporate performance are related. Bamberet al.(2010) conclude that managers' voluntary disclosure styles are related to demographic characteristics. Also, Franciset al.(2008) demonstrate a negative relation between CEO reputation and earnings quality. We conjecture that, management demography affects auditor choice and earnings quality. Using a sample of 3,881 firm-year observations between 2001 and 2005 in China and controlling for board governance characteristics, we find that a chairperson with better reputation (i.e., holding titles) prefers well-known auditors on the national basis, regional basis and in the industry group. Furthermore, chairpersons with titles and longer tenure report earnings of higher quality. Our results are robust using different measures of auditor choice and earnings quality.

Keywords: Auditor choice; management demography; board governance; earnings quality (search for similar items in EconPapers)
JEL-codes: G1 G2 G3 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (6)

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DOI: 10.1142/S0219091511500093

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