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Signing auditors’ cultural background and client investment efficiency

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  • Hou, Fei
  • Li, Meina
  • Xu, Yang
  • Zhou, Song

Abstract

This paper explores the effect of signing auditors’ cultural background on investment efficiency. Using a sample of Chinese listed firms between 2001 and 2019, we empirically examine the impact of signing auditors’ cultural background on client investment efficiency. We find that signing auditors with merchant guilds cultural background significantly increase investment efficiency. Moreover, the increase of client investment efficiency is partly due to improved audit quality brought about by auditors’ cultural background. Further tests show that the above relationship is more pronounced in firms with high financial constraint and high level of risk taking. This paper contributes to the literature on the effect of signing auditors’ characteristics on corporate behaviors and the long-term consequence of culture on individuals and organizations.

Suggested Citation

  • Hou, Fei & Li, Meina & Xu, Yang & Zhou, Song, 2023. "Signing auditors’ cultural background and client investment efficiency," Finance Research Letters, Elsevier, vol. 51(C).
    • Handle: RePEc:eee:finlet:v:51:y:2023:i:c:s1544612322005943
    DOI: 10.1016/j.frl.2022.103417
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    More about this item

    Keywords

    Signing auditors; Cultural background; Merchant guilds culture; Client investment efficiency;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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