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Audit partner rotation and negative information hoarding: evidence from China
Author(s) -
Zhao Yujie,
Xu Nianhang,
Zhou Donghua,
Chan Kam C.
Publication year - 2020
Publication title -
accounting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.645
H-Index - 49
eISSN - 1467-629X
pISSN - 0810-5391
DOI - 10.1111/acfi.12676
Subject(s) - audit , hoarding (animal behavior) , business , sample (material) , china , negative information , psychology , accounting , social psychology , political science , medicine , chemistry , chromatography , feeding behavior , law
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.