An Empirical Study Of The Auditor Switches In China

In well-developed security market, the research of auditor switches has a history of more than 20 years and a lot of research achievements have been obtained. Because Chinese security market started relatively late, the research on auditor switches in our country didn't start until 2000. With the more frequent occurrence of auditor switching in the security market, more and more concern is drawn to it. Studying its information content is of great importance to the decision-making of investors and regulatory agencies.This thesis focuses on the concern about auditor switches. On the basis of summarizing research achievements on auditor switches both at home and abroad, we analyzed the theory and status quo of auditor switches. Applying the Event-study Methodology, we examined the market reactions of 100 sample auditor-switching listed companies on the day of directorate announcement of the auditor switching between 1999 and 2003. Applying the Factor-analysis Methodology, we empirically studied the corporate performance changes of 130 sample listed-companies after auditor-switching. We found that the security market of our country generally showed little reaction to the auditor switching information of listed companies. But some reaction was showed to the auditor switching information of listed companies that either switched their auditors voluntarily or was judged with non-standard audit opinions before switching. Generally, the corporate performance of listed companies after auditor switching dropped considerably. For those listed companies that switched from top-ten auditors to non-top-ten auditors, or from one top-ten auditor to another, or from one non-top-ten auditor to another, a bigger portion of them had corporate performance drops and the drops were to a greater extent; for those listed companies switching from non-top-ten auditors to top-ten auditors, their corporate performance drops were not distinct and a bigger portion of them had corporate performance rises. Finally, based on the results of our empirical study, we brought forward some proposals on the disclosure of information and supervision of auditor switching, in order to improve accounting information quality and protect the interests of investors.