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Audit partner rotation and negative information hoarding: evidence from China

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  • Yujie Zhao
  • Nianhang Xu
  • Donghua Zhou
  • Kam C. Chan

Abstract

We analyse the impact of mandatory audit partner rotation (MAPR) on negative information hoarding about audit clients using a sample of Chinese firms. Our findings suggest that the outgoing audit partners hoard negative information in pre‐MAPR, as revealed by a decrease in crash risk, while the incoming audit partners disclose negative information in post‐MAPR. Additional analysis suggests that the results are more pronounced among reviewing partners than engaging partners. We also find that when the outgoing audit partner has strong professional abilities or weak personal network with the client or incoming partner, there is less negative information hoarding around MAPR.

Suggested Citation

  • Yujie Zhao & Nianhang Xu & Donghua Zhou & Kam C. Chan, 2020. "Audit partner rotation and negative information hoarding: evidence from China," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 60(5), pages 4693-4722, December.
    • Handle: RePEc:bla:acctfi:v:60:y:2020:i:5:p:4693-4722
    DOI: 10.1111/acfi.12676
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    References listed on IDEAS

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    Cited by:

    1. Lixiang Wang & Wendi Hou & Yupei Liu, 2023. "How do co‐shareholding networks affect negative media coverage? Evidence from China," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(4), pages 4221-4249, December.
    2. Athavale, Manoj & Guo, Zhaorui & Meng, Yun & Zhang, Tianshu, 2022. "Diversity of signing auditors and audit quality: Evidence from capital market in China," International Review of Economics & Finance, Elsevier, vol. 78(C), pages 554-571.
    3. Sammy Xiaoyan Ying & Chris Patel & Aeson Luiz Dela Cruz, 2023. "The influence of partners' known preferences on auditors' sceptical judgements: The moderating role of perceived social influence pressure," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(3), pages 3193-3215, September.

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