| Adam Smith (1776) once said in his monograph,"The directors of such [joint-stock] companies, however, being the managers rather of other people’s money than of their own, it cannot well be expected, that they should watch over it with the same anxious vigilance with which the partners in a private copartnery frequently watch over their own. Like the stewards of a rich man, they are apt to consider attention to small matters as not for their master’s honor, and very easily give themselves a dispensation from having it.Negligence and profusion, therefore, must always prevail, more or less, in the management of the affairs of such a company."This reveals the consequences of the separation of two rights-negligence and profusion.Jensen and Meckling (1976) defined the principal-agent contract relationship and its consequences as the agency relationship and agency cost.The separation of ownership and management formed the contractual relationship and thus formed the agency conflict in enterprise.In order to solve the agent conflict, enterprise to choose different ways. Just as Jensen and Meckling (1976) said,"These methods include auditing, formal control systems, budget restrictions,the establishment of incentive compensation systems which serve to identify the manager’s interests more closely with those of the outside equity holders, and so forth." In reality, with the development of CPA auditing,auditing has become an important governance mode to alleviate agency conflicts and reduce agency cost.Research on agency conflicts and high quality auditor in abroad was very early and have a certain amount of research results,but in Chinese academic circles, research is still not sufficient. Moreover, the capital market of our country starts late, there is a certain gap with the western capital market. And also, the characteristics of Chinese corporate governance are very different from the western countries.Therefore, it is very necessary to study the relationship between the agency conflicts and the demand of high quality auditor, it has both the theoretical and practical significance.The center of this research is--the agency conflicts are more serious,the agency cost is higher, thus the demand for high quality auditor is more urgent; the company whose auditor is of high quality, will have a great effect on corporate governance, which will enhance the company’s value in a certain extent.This paper mainly discuss the relationship between the listing Corporation agent conflict and high quality auditor from the following three aspects to research:Firstly, the causes of the three level agency conflicts in agency theory (the owner-operator conflict, large-small shareholders conflict, creditors conflict) and their influence on the agency cost;Secondly, verify the relation between the agency conflict in three levels and the demand of high quality auditor;Thirdly, check the governance effect of high quality auditors on the agency conflict.In order to study and answer these three questions, the method of this research uses a combination of theoretical analysis and empirical analysis to carry on theoretical analysis and data analysis.Firstly, the theoretical study, including the first, the second or third part of the article.The first part is the introduction. Analyse the background, research significance, problems, research methods and framework.The second part is literature review.The third part is the description fo the related concept. This part is mainly around the reasons of the agent conflict as well as the relationship between three-levels’conflicts and the agency cost; the meaning and the influence factors of audit quality; the factors that motives selection of auditors.The next part-the empirical analysis, in order to solve three problems, the research put forward7hypothesis:1-3study the relationship between the three levels of agent conflicts and equity agency costs;4-6study the relationship between three levels of agency conflicts and the demand of high quality auditor; Hypothesis7verify if the high quality auditor have the governance effect on the agency conflicts or not.The empirical part includes the fourth and the fifth parts.The fourth part is the empirical design.This part based on the analysis of the former three part, proposes the assumptions of this article;at the same time explain the selection and definition of variables; introduce the final data samples, source and the model. The fifth part is the empirical analysis. This part using univariate and multivariate analysis which performed on the sample data obtained a series of results, which verify the assumption.Finally, the conclusion of this paper.The last part, summarize the research ideas and research results; at the same time thinking about this topic, puts forward the countermeasure and suggestion and points out the deficiencies and limitations of this study, study on development direction of the future.Through the empirical test, the paper draws the following conclusions:Firstly,the relationship between the three-levels’agency conflicts and the equity agency cost.The equity agency cost is divided into management agency cost and big shareholders agency cost.Hypothesisl-3study the relationship between the three levels of agent conflicts and equity agency costs;the empirical test also verifies the hypothesis1,2, but3only in the hypothesis for management agency cost reduction effect is remarkable, and the governance effect of the controlling shareholder is not significant.Secondly,the relationship between the agent conflict and the demand of high quality auditor.Results show that, Hypothesis4,5,6are established to verify the agency conflict between and the demand for high quality auditor conjecture. The empirical test verifies the hypothesis4,5,6.The last hypothesis-the governance effect of high quality audit.Ch.oose auditor of high quality is effective? Through the two-stage regression, this paper proved the hypothesis7, namely the high quality auditor will improve performance of the company and thereby reducing agency conflicts.The contribution of this paper are just as follows:From the existing literature, we can see, the research on the European and American market are more fully. However, as the European and American market are different form the Chinese capital market, therefore, this paper attempts to verify the relationship between the agency conflicts and the auditor choice from the point of view of China capital market.This paper attempts to sort out the idea of empirical studies in the literature, using comprehensive results of previous studies combined with the domestic situation, in order to carry on a scientific and systemic study.This paper also has some shortcomings: Firstly, this paper considers only the agency costs of equity agency cost, without considering the agency cost of debt.Secondly, the choice of variables.There are many factors affecting the high quality auditor, but generally in the empirical study, we usually choose the international four accounting firm.This paper also follow this practice and choose the same international big four accounting firm as the measurement of high quality auditor. However, some scholars question if the international big four can represent high quality audit or not.Finally, this study is based on the static study. This paper did not analyse a dynamic relationship between the agency conflicts and high quality auditor. |
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