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Auditor gender and stock price crash risk: evidence from China

Author

Listed:
  • Liangcheng Wang
  • Yining Dai
  • Yifan Zhang
  • Yuye Ding

Abstract

Stock price crash risk is attributed to agency problems and information asymmetry. Auditors generally play a more important governance function in countries with weak legal institutions. Previous studies document that audit judgements and information processing differ by auditor gender, which ultimately impacts the quality of audited financial reporting and the governance role. This study examines the relationship between auditor gender and stock price crash risk, particularly whether female auditors may reduce stock price crash risk because of their risk aversion and ethics. Using a large sample in China with weak legal institutions, this study finds that female auditors play a governance role in curbing stock price crash risk, and the effect is dominant in the firms with high agency costs. Also, these findings are robust to a battery of tests. Finally, this study conducts two sets of cross-sectional analyses, indicating that the effect of auditor gender mostly concentrates on non-state-owned enterprises with high agency costs, and on firms with non-busy auditors that are deemed to have sufficient time to properly engage their audits. This study extends the literature on determinants of crash risk and has implications for firms, stakeholders and monitors over reducing crash risk to keep sustainable growth.

Suggested Citation

  • Liangcheng Wang & Yining Dai & Yifan Zhang & Yuye Ding, 2020. "Auditor gender and stock price crash risk: evidence from China," Applied Economics, Taylor & Francis Journals, vol. 52(55), pages 5995-6008, November.
    • Handle: RePEc:taf:applec:v:52:y:2020:i:55:p:5995-6008
    DOI: 10.1080/00036846.2020.1808576
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    Cited by:

    1. Li, Dongxin & Zhang, Li & Li, Lihong, 2023. "Forecasting stock volatility with economic policy uncertainty: A smooth transition GARCH-MIDAS model," International Review of Financial Analysis, Elsevier, vol. 88(C).
    2. Xinfeng Jiang & Jiayi Zhu & Ahsan Akbar & Ziyu Hou & Xiaolan Bao, 2022. "The dark side of executives' professional background: Evidence from Chinese firm's stock price crash risk," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(8), pages 3771-3784, December.
    3. Khaskheli, Asadullah & Zhang, Hongyu & Raza, Syed Ali & Khan, Komal Akram, 2022. "Assessing the influence of news indicator on volatility of precious metals prices through GARCH-MIDAS model: A comparative study of pre and during COVID-19 period," Resources Policy, Elsevier, vol. 79(C).
    4. Shi, Jinyan & Liu, Xu & Li, Yanxi & Yu, Conghui & Han, Yushan, 2022. "Does supply chain network centrality affect stock price crash risk? Evidence from Chinese listed manufacturing companies," International Review of Financial Analysis, Elsevier, vol. 80(C).
    5. Hou, Fei & Shen, Huayu & Wang, Ping & Xiong, Hao, 2023. "Signing auditors' cultural background and debt financing costs," International Review of Financial Analysis, Elsevier, vol. 87(C).
    6. Duan, Jiangjiao & Lin, Jingjing, 2023. "The impact of COVID-19 on the crash risk of registered new shares in China," Pacific-Basin Finance Journal, Elsevier, vol. 79(C).
    7. Arthur Jin Lin, 2023. "Volatility Contagion from Bulk Shipping and Petrochemical Industries to Oil Futures Market during the Economic Uncertainty," Mathematics, MDPI, vol. 11(17), pages 1-19, August.

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