Public Communication of Audit Risks and Related-Party Transactions: Evidence from China

This paper examines whether and how firms' engagement in related-party transactions (RPTs) is shaped by public communication of audit risks as required by the expanded audit report. Using the phased regulatory changes in China and a difference-in-differences design with firm fixed effects and m...

Full description

Saved in:
Bibliographic Details
Main Authors: HOPE, Ole-Kristian, YUE, Heng, ZHONG, Qinlin
Format: text
Language:English
Published: Institutional Knowledge at Singapore Management University 2023
Subjects:
Online Access:https://ink.library.smu.edu.sg/soa_research/2024
https://ink.library.smu.edu.sg/context/soa_research/article/3051/viewcontent/PublicComm_AuditRisks_av.pdf
Tags: Add Tag
No Tags, Be the first to tag this record!
Institution: Singapore Management University
Language: English
id sg-smu-ink.soa_research-3051
record_format dspace
spelling sg-smu-ink.soa_research-30512024-01-04T05:18:12Z Public Communication of Audit Risks and Related-Party Transactions: Evidence from China HOPE, Ole-Kristian YUE, Heng ZHONG, Qinlin This paper examines whether and how firms' engagement in related-party transactions (RPTs) is shaped by public communication of audit risks as required by the expanded audit report. Using the phased regulatory changes in China and a difference-in-differences design with firm fixed effects and matching, we find that firms significantly reduce their RPTs after the adoption of expanded audit reports (EARs). To investigate potential mechanisms, we find that (1) investor scrutiny increases after the adoption of EARs, (2) the reduction of RPTs is more pronounced when EARs are more likely to attract investor attention, and (3) the reduction of RPTs is weaker when firms are less concerned about investor scrutiny. The results suggest that EARs can attract investor scrutiny and increase the possible penalty associated with self-dealing, thus motivating firms to reduce RPTs. 2023-11-01T07:00:00Z text application/pdf https://ink.library.smu.edu.sg/soa_research/2024 info:doi/10.2308/AJPT-2021-184 https://ink.library.smu.edu.sg/context/soa_research/article/3051/viewcontent/PublicComm_AuditRisks_av.pdf http://creativecommons.org/licenses/by-nc-nd/4.0/ Research Collection School Of Accountancy eng Institutional Knowledge at Singapore Management University related-party transactions public communication of audit risks expanded audit report China RPT auditing self-dealing real effects of disclosure Accounting Asian Studies Corporate Finance
institution Singapore Management University
building SMU Libraries
continent Asia
country Singapore
Singapore
content_provider SMU Libraries
collection InK@SMU
language English
topic related-party transactions
public communication of audit risks
expanded audit report
China
RPT auditing
self-dealing
real effects of disclosure
Accounting
Asian Studies
Corporate Finance
spellingShingle related-party transactions
public communication of audit risks
expanded audit report
China
RPT auditing
self-dealing
real effects of disclosure
Accounting
Asian Studies
Corporate Finance
HOPE, Ole-Kristian
YUE, Heng
ZHONG, Qinlin
Public Communication of Audit Risks and Related-Party Transactions: Evidence from China
description This paper examines whether and how firms' engagement in related-party transactions (RPTs) is shaped by public communication of audit risks as required by the expanded audit report. Using the phased regulatory changes in China and a difference-in-differences design with firm fixed effects and matching, we find that firms significantly reduce their RPTs after the adoption of expanded audit reports (EARs). To investigate potential mechanisms, we find that (1) investor scrutiny increases after the adoption of EARs, (2) the reduction of RPTs is more pronounced when EARs are more likely to attract investor attention, and (3) the reduction of RPTs is weaker when firms are less concerned about investor scrutiny. The results suggest that EARs can attract investor scrutiny and increase the possible penalty associated with self-dealing, thus motivating firms to reduce RPTs.
format text
author HOPE, Ole-Kristian
YUE, Heng
ZHONG, Qinlin
author_facet HOPE, Ole-Kristian
YUE, Heng
ZHONG, Qinlin
author_sort HOPE, Ole-Kristian
title Public Communication of Audit Risks and Related-Party Transactions: Evidence from China
title_short Public Communication of Audit Risks and Related-Party Transactions: Evidence from China
title_full Public Communication of Audit Risks and Related-Party Transactions: Evidence from China
title_fullStr Public Communication of Audit Risks and Related-Party Transactions: Evidence from China
title_full_unstemmed Public Communication of Audit Risks and Related-Party Transactions: Evidence from China
title_sort public communication of audit risks and related-party transactions: evidence from china
publisher Institutional Knowledge at Singapore Management University
publishDate 2023
url https://ink.library.smu.edu.sg/soa_research/2024
https://ink.library.smu.edu.sg/context/soa_research/article/3051/viewcontent/PublicComm_AuditRisks_av.pdf
_version_ 1787153708911427584