An Study On The Impact Of Institutional Investor Holding On Audit Quality Of Listed Companies

The true extent of investor’s investment decision in the stock market depends mainlyon the information disclosure of listing Corporation. The listing Corporation to disclosefinancial information to the CPA auditing helps to improve the reliability of listingCorporation financial information and confidence level. The level of audit quality affectsthe quality of information disclosure of listing Corporation, related to the interests ofinvestors, in relation to the rational allocation of resources. But in recent years, thefrequent exposure of the financial fraud case making investors in blame the weakmanagement and supervision of listing Corporation, also began to blame the listingCorporation audit failure, audit occupation face credibility challenge. Audit quality oflisting Corporation has become the focus of attention of the public.Since the strategy of “unconventional development of institutional investors" byChina Securities Regulatory Commission in2001,both the number and the size ofinstitutional investors have been on a fast-growing way, and now the institutional investorshas become an important force in the securities market. Under this situation, the influenceof share-holdings of institutional investors, especially, different types of institutionalinvestors holding on the quality of audit, has become the mutual interest of theory andpractice communities.This paper has discussed the issue from both theoretical and empirical respective. Soafter the review of domestic and foreign scholars’ research, relevant theories. Firstdiscusses the motivation of institutional investors to affect the quality of audit.Then thewriter analyzes the mechanism of institutional investors exerting on audit quality, fromboth the internal channels and external channels. In the empirical analysis, this paper userecent3years data of listed company as sample to analyze the influence of share-holdingsof institutional investors, especially, different types of institutional investors holding on thequality of audit. The results show that the overall institutional investor holdings or not, andthe overall proportion of institutional investors holding have significant positive impact onthe quality of audit of listed companies; but the subdivision of different types of institutional investors finds that only the social security funds and securities fund holdshares or not, have significant positive influence on the quality of listed companies’information disclosure, while the security companies, trust companies, insurancecompanies and qualified Foreign Institutional investor (QFII) which is widely anticipatedby the regulators, otherwise, not. In the end, according to the research results and the actualsituation in China’s capital market, this article proposes targeted recommendations andcountermeasures.