Negative Media Reports,Legal Environment,and Auditor Change

Since the 20 th century, the power of the media is growing gradually that aroused widespread concern in society, it has become an important social phenomenon. After the study of theory and empirical, academia already sure that media monitoring has become an important way of external corporate governance mechanism. In recent years, media attention to audit has gradually attract scholars’ passion on the study of important auditing issue. And then, as a new external governance mechanism, whether the media really play the functions of corporate governance, has become a hot topics debate between academics with practitioners. In academia, some scholars believe that in the social regulation of corporate governance and macro management environment, media has become an indispensable part in addition to the legal system.This study is based on China’s A-share market which companies has change auditor in the year of 2010 to 2014, and from the perspective of external environmental governance, especially negative media coverage terms, to explore the deep reason of listed company auditor change. The study found that the behavior of listed companies to change auditors will be significantly affected by media coverage, that negative news brought by media supervision of enterprises will inevitably play a governance effectiveness. Media to play its oversight functions of governance, in generally, embodied by impact of auditor reputation mechanism, focusing effect, signal transduction, etc.. Once listed companies has coverage by negative media, the huge public pressure will force them to choose high-quality auditors to improve audit quality. In addition, this paper further explores the role of law in the environmental impact to the media aspects of the governance effect. In different places, legal environment in the region will be different, even the extent of media protected by law are different. The legal environment in the better areas, there are less government intervention to the media, which provided good conditions to media effective oversight. So, in the necessary of improving audit quality, when a listed company to change auditors will be more consideration to select large audit. On the contrary, the legal environment in poor areas, due to local protectionism or pursue personal interests, the government would like shelter the company, get involved in media, giving the huge pressure to media, which was bound to destroy the independence of the media, making it difficult to carry out effective supervision of the enterprise.In summary, the studies of media with auditor change at home and abroad are relatively less, especially the study of dynamic relationship between auditor changes, negative media reports and the legal environment. Therefore, this paper choose A-share listed companies as the research object, from the dynamic perspective of media management and the rule of law, hoping a better understanding of auditors change in the listed companies.