The negative effect of regional banking competition on audit quality: evidence from China

Yuran Chen, Dongni Duan, Yidan Mao and Lingli Zhang

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Using Chinese A-share listed data from 2007 to 2020, we reveal that increased competition in the banking system impairs the audit quality of banks’ credit clients, which is attributed to the loss of bank supervision. For firms with poor corporate governance or information quality, firms that hire auditors with low independence or high catering motivation, or firms in an immature external environment, such negative effect is more prominent. Furthermore, we indicate that firms are prone to shop for favorable audit opinions under high banking competition. Overall, we illustrate the negative effect of banking competition on auditors and provide meaningful implications.

Keywords: regional banking competition; emerging market; auditor conservatism; Regional banking competition; AAM requested (search for similar items in EconPapers)
JEL-codes: G21 M42 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2024-12-30
New Economics Papers: this item is included in nep-acc, nep-cna, nep-com and nep-fdg
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Published in Emerging Markets Finance and Trade, 30, December, 2024, 60(14), pp. 3177 - 3200. ISSN: 1540-496X

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