Product Market Competition And Auditor Selection

In modern competition theories,as a kind of external governance mechanism,product market competition has directly impacts on listed companies' management decision-making,internal governance behavior and so on.There are some literature has already researched the relationship between product market competition and corporate behavior under the environment of native system.However,auditors as one of the important participants of the capital markets,whether the company's choice of auditors will be affected by the product competition in the market its facing has not been widely confirmed.On the other hand,when face the product market competition,companies which have different property rights,could have different behaviors,since they have various competitive pressures,internal aspects(such as the complexity of the principal-agent relationship).And this difference may be reflected in the choice of auditor.Based on this,this article will put the product market competition into the study of auditor choice,and distinguish the property rights of companies.By researching the effects of product market competition on auditor choice,this article wants to have a thorough understanding about what kind of role the product market competition play in the management behavior,and the role high quality audit plays in the capital market,and provide relevant departments with corresponding policy suggestions.This paper divides the product market competition into two dimensions,the industry competition degree and the enterprise competitive position respectively.Considering the demand preference of companies under the different levels of product market competition on the value of auditing,theoretical analysis in this paper starts form three aspects:the degree of industry competition and auditor choice,companies' competitive position and auditor choice,as well as the two dimensions and auditor choice,then corresponding assumptions are established.It has been found that if companies have higher degree of industry competition or higher competitive position,they are more likely to select high-quality firms to audit.But the two dimensions of product market competition has significant asymmetric regulation on the tendency to choose high-quality auditor,that means compared with high competitive position companies,when the degree of industry competition is intensified,low competitive position companies will be more prompted of choosing high-quality auditors.Further analysis found that the connection between product market competition and auditor selection is more obvious in non state-owned companies.There some innovations in this paper,first,it considered the influence of product competition on auditor choice,this can be regarded as a complement to audit demand theory.The second one is based on the two-dimensional perspective of industry level and company level,to make up the single dimension in past research.There are still some defects in this paper,such as sample selection bias,and the variable calculation method may not accurate enough,the model for the choice of control variables may not be comprehensive enough,as well as the policy recommendations may not be perfect and many other shortcomings.