Based On The Perspective Of Rent-Seeking Theory To Study On The Auditor Selection Of IPO Company

Since 2004, China began to really implement the "approval system". The Issue Audit Committee audits the application information. Therefore through the meeting of issuance examination is the last step of IPO, but also the key step. Issue Audit Committee is composed by government officials, auditors, lawyers, asset appraisers, university teachers and other personnel. Auditors account for about 1/3 of the seats. IPO Company must provide the financial statements audited by auditors. Therefore, auditors in the IPO process have a dual role. It is IPO intermediaries employed by companies, but also the assessment person of IPO qualifications. Then whether IPO Company will utilize the dual role? Whether IPO company will purchase the services of auditors in the issuance examination committee to help him pass the IPO audit ?Based on the perspective of rent-seeking theory, this essay studies on the auditor selection of IPO Company, using normative research and empirical research. First, we make the descriptive statistics of the situation of IPO Company's auditor choice. We find that the behalf of high-quality auditors:"big four" and "big ten" occupy small part of the audit market. So the demand for high quality audit cannot well explain the motives of IPO Company's auditor choice. We also find that the auditors who hold a post of Issue Audit Committee (Referred to as FSW) occupy a big part of the audit market. So rent-seeking theory can well explain the motives of IPO Company's auditor choice. Finally, we want to find the traits of companies who prefer to FSW .In this paper, FSW is the explained variable. Lever, the proportion of biggest shareholder, ownership and risk are explanatory variables. We also select the appropriate control variables. We find the proportion of biggest shareholder and ownership are related with the FSW, but the remaining factors are not related using logistic regression. As rent-seeking is a human activity and is unproductive, so it is more likely related with artificially controlled factor such as corporate governance and is more likely not related with objective factors such as risk and financial condition. Issue size, lawyers and asset appraisers, the stock market they listed are related with FSW, and the remaining factors are not relevant. Based on this conclusion, we make the following recommendations: lowering the proportion of auditors in the Issue Audit Committee; enhance the auditors'independence that hold a post in Issue Audit Committee; strengthening the issuance examination committee's internal control and external oversight; establishment of an effective disciplinary mechanism, improve the stock issuing system.More people use normative research to study the behavior of IPO Company's auditor choice. There is less empirical research. So it is lack of empirical support. The contribution of this paper is from the perspective of rent-seeking to provide empirical support and enrich the study of IPO Company's auditor choice. China's growth enterprise market was launched in May 2009, so this paper considers the new factor. Another contribution of this paper is to observe the companies how to choose when they list in different stock market.