Audit Tenure,Accounting Firm Size And Stock Price Crash Risk

The stock price crash risk refers to the probability that the stock price will plunge in a short period of time.The crash of the stock price has damaged the confidence of investors and disrupted the order in the capital market.Therefore,it has become hot topics in recent academic articles.From the aspect of external auditing,this paper examines whether auditor tenure is associated with future stock price crash risk.Using U.S and Chinese data respectively,Callen et al(2017)and Hong et al(2018)tested the relationship between auditor tenure and stock price crash risk,but made different conclusions.In addition,they only measured auditor tenure on the accounting firms,not on the signed CPAs.Therefore,based on prior studies,this paper tries to examine whether auditor tenure affect stock price crash risk from the aspects of both accounting firms and signed CPAs.Considering that the “Reputation Hypothesis”,the “Deep-pocket Theory” and learning ability may make accounting firms of different sizes different in quality,this paper tries to test whether exists differences of the relationship of auditor tenure and stock price crash risk between different sizes of accounting firms.Based on the above analysis,using a large sample of 2007-2016 Shanghai & Shenzhen A-share listed companies,this paper finds robust evidence that auditor tenure is negatively associated with future stock price crash risk from the aspects of both accounting firms and signed CPAs.We further provide evidence,indicating that compared to small ones,the large accounting firms can enhance the negative relationship between auditor tenure of the accounting firm and crash risk,but not from the aspect of the signed CPA.