Mixed-ownership reform and auditor choice: evidence from listed state-owned enterprises

Based on data of state-owned enterprises listed on the Shanghai and Shenzhen Stock Exchanges from 2003 to 2017, this study examines how mixed-ownership reform affects a company’s auditor choice from the perspectives of ownership structure and governance. We find that the higher the degree of mixed-ownership reform of state-owned enterprises, the more inclined they are to choose international ‘big four’ accounting firms as auditors. Further, this effect is more pronounced for firms in high competition industries, in low marketisation regions and with low information transparency. Notably, mixed-ownership reform increases financial constraints of state-owned enterprises. The results of a mediation test suggest that mixed-ownership reform improves the accounting information quality of state-owned enterprises through the choice of auditors. Our study enriches the literature of mixed-ownership reform and auditor choice and provides empirical evidence of the economic consequences of mixed-ownership reform, which is relevant for guiding future state-owned enterprises reform.