Institutional Investor Sentiment,Stock Exchange Inquiries And Auditors’ Caution

The report of the 19 th National Congress of the Communist Party of China emphasized that advancing the modernization of the national governance system and governance capabilities requires the transformation of government functions and innovative supervision methods.In the context of the reform of the regulatory system,stock exchanges have begun to inquire about listed companies.As a new type of regulatory model,inquiry letter supervision is not only a hot topic in academic research,but also aroused information from institutional investors,auditors and other Widespread concern of users.After the listed company is inquired by the exchange,are its auditors more cautious in performing audit work?Institutional investors are an important part of my country’s capital market,and their sentiments are easily affected by market information.As a regulatory means to regulate the capital market,will the inquiry letter affect the sentiment of institutional investors? Audit reports issued by auditors are entrusted by investors.Investors attach great importance to the audit opinions issued by auditors.Will changes in institutional investor sentiment make auditors more cautious? These issues are worthy of in-depth study.Based on this,this article combs the relevant literature,analyzes the mechanism based on reputation effect theory,information asymmetry theory,signal transmission theory,and investor sentiment theory,and proposes four research hypotheses.Based on the current institutional background of the exchange inquiries and supervision,the 2014-2019 my country Shanghai and Shenzhen A-share listed companies are selected as the research sample,and the listed companies that have received the financial report inquiry letter are used as the experimental group,and the 1:1 has been returned to the neighbors.The listed companies matched by the matching method(PSM)are used as the control group,and the model is constructed for empirical testing.The results of the study found that:(i)Institutional investor sentiment can reduce auditors’ cautiousness;(ii)Inquiry letter supervision can increase the cautiousness of auditors;(iii)Inquiry letter supervision can effectively alleviate the negative impact of institutional investor sentiment on auditors’ cautiousness;(iv)Further research has found that the regulatory effect of enquiry letter supervision on the relationship between institutional investor sentiment and auditors’ cautiousness is more reflected in Among the listed companies that have a high level of corporate governance,are audited by non-"Big Four" accounting firms,have restated financial reports,and have more inquiries.Finally,this paper uses the PSM-DID model,fixed-effects model and the robustness test method of replacing the three core variables to verify,the above results are still robust.The research results broaden the research thinking of institutional investor sentiment and the supervision of exchange inquiry letters,and enriche the relevant research of auditors.The research results inspire auditors to make full use of the risk warning information of inquiry letters and perform audit work more carefully.Furthermore,it has certain enlightenment and reference significance for the formulation of regulatory policies of my country’s stock exchanges,the improvement of the governance level of listed companies,and the investment decisions of investors.