Audit partner rotation and negative information hoarding: evidence from China. (14th July 2020)

• Record Type: Journal Article
• Authors: Zhao, Yujie; Xu, Nianhang; Zhou, Donghua; Chan, Kam C.
• Is Part Of: Accounting and finance. Volume 60:Number 5(2020)
• Page Start: 4693
• Page End: 4722
• Publication Date: 2020-07-14
• Subjects: Audit partner personal attributes -- Audit quality -- China -- Mandatory audit partner rotation -- Negative information hoarding; Accounting -- Periodicals; Finance -- Periodicals; 657.05
• DOI: 10.1111/acfi.12676
• Languages: English
• ISSNs: 0810-5391

Abstract

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.