Do Auditors Respond to Media Coverage? Evidence from China

Gong, Stephen; Gul, Ferdinand A.; Shan, Liwei

doi:10.2308/acch-52123

Cited by 41 publications

(31 citation statements)

References 79 publications

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“… 23. Consistent with Gong, Gul, and Shan’s (2014) and Lin, Li, and Gong’s (2014) findings, the net tone of Chinese news articles about listed firms is, on average, positive in both the pre-scandal and the post-scandal periods: The average ratio of positive to negative words is 4.25 in the comparison period (July 17, 2006–December 31, 2005) and 2.19 during the scandal period (July 17, 2006–December 31, 2006). However, the drop in media positivity is only suggestive, and should be interpreted with caution.…”

supporting

confidence: 55%

“…We also content analyze all newspaper reports about the connected firms during the event and comparison periods. 21 For this purpose, we utilize the text analysis method developed by Gong, Gul, and Shan (2014), who build a comprehensive dictionary of positive and negative terms, specifically for Chinese financial news. 22 We find a significant increase in the number of news articles pertaining to the connected firms during the event period, relative to the comparison period.…”

Section: Resultsmentioning

confidence: 99%

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Implications of Political Patronage and Political Costs for Corporate Disclosure

Chen

Cheng

Gong

et al. 2016

Journal of Accounting, Auditing & Finance

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We take advantage of China's relationship-based institutional setting to investigate whether and how firms' disclosure decision is affected by political patronage and associated political costs considerations. Using a sample of 65 firms involved in the Shanghai Pension corruption scandal of 2006, we find that relative to benchmark firms, the connected firms are associated with lower levels of disclosure prior to the scandal. However, they significantly increased their disclosures in the year immediately following the public exposure of the scandal. A content analysis indicates that the increased disclosures are value-relevant, and are not merely used as a public relations effort to subdue public outcry in the immediate aftermath of the scandal. Cross-sectional analyses further reveal that the increase in disclosure is positively associated with the extent of firm's guanxi dependence and type/severity of involvement in the scandal. We conclude that the increased disclosures are in response to the heightened risk and potential costs of regulatory and public scrutiny in the wake of a major event involving high political and public sensitivity. The evidence is supportive of the political costs hypothesis, and has important managerial and policy implications.

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supporting

confidence: 55%

Section: Resultsmentioning

confidence: 99%

Implications of Political Patronage and Political Costs for Corporate Disclosure

Chen

Cheng

Gong

et al. 2016

Journal of Accounting, Auditing & Finance

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“…However, the variable is not significant in 30.6% of the cases. Furthermore, we identified four studies that indicate a negative relation between the ratio of total debt/total assets and audit fees (Bronson et al 2017;Lesage et al 2017;Gong et al 2018;Hoitash and Hoitash 2018), in contrast to the assumption that an increase in this ratio leads to higher audit fees.…”

Section: Financial Positionmentioning

confidence: 99%

What is it going to cost? Empirical evidence from a systematic literature review of audit fee determinants

2020

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The audit market is subject to ongoing regulation to ensure or improve the quality of audit services. For this reason, international research on the audit market is highly popular. As part of this discussion, pricing is considered one of the most relevant aspects of audits. However, a remarkable heterogeneity of the control variables used in empirical studies can be observed. Prior meta-analyses on audit fees already summarized and categorized them for audit fee studies covering financial periods until fiscal year 2007. We contribute to the international literature with an up-to date and systematic review approach on audit fee studies published in international relevant scientific journals (JQ3 A + , A, B). In addition to prior reviews and meta-analyses, we finally suggest a standard model for the most important fee drivers that can be used for future audit fee studies. Our unique approach is based on an EBSCO keyword search with a sample of 385 papers published in international relevant scientific journals (JQ3 A + , A, B) and is using a scoring model to assess significance of audit fee control variables. On the one hand, we enrich the literature by a new state of the art paper on pricing within audit firms. On the other hand, we contribute to the international literature on audit markets from a theoretical point of view by deriving a new testable model of audit fee determinants. Therefore, our empirical results provide several fundamental insights that can be used for further empirical and theoretical research on the pricing of audit services. Thus, the results are meaningful not only for researchers within the field of auditing but also for experts in management, pricing or European legislature.

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“…While a few early studies (e.g., Joe, 2003;Mutchler et al, 1997) examine how auditors react to news about a particular type of news (e.g., a loan default), how auditors respond to a client's general media visibility has received little attention in the literature. One exception is the study by Gong et al (2018). They find a positive association between general media coverage and audit fees in China.…”

Section: Introductionmentioning

confidence: 98%

“…They find a positive association between general media coverage and audit fees in China. We extend Gong et al (2018) by examining whether media coverage has an effect on FRQ that operates through auditors. Moreover, we (a) focus on the United States where litigation risk is particularly high, (b) use path analysis to examine the indirect role of auditors, and (c) measure media coverage more broadly as Gong et al (2018) only consider articles from three newspapers in China.…”

Section: Introductionmentioning

confidence: 99%

Does Media Exposure Affect Financial Reporting Quality Through Auditors?

Cahan

Chen

Wang

2020

Journal of Accounting, Auditing & Finance

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We examine whether the media has an indirect corporate governance effect on financial reporting quality (FRQ) that operates through auditors. This occurs because greater media coverage can magnify an auditor’s business risk by exposing the auditor to more potential litigation and reputation damage if an audit failure occurs. We use a path analysis to examine the direct and indirect channels of media corporate governance. We find a positive association between media coverage and FRQ that is mediated by audit fees, and the results are stronger for firms with greater incentives to engage in earnings manipulation. In contrast, we find no evidence that the media has a direct corporate governance effect on FRQ. Our results show how the media’s corporate governance reach can be extended by auditors who care about how media coverage impacts their risk level.

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Do Auditors Respond to Media Coverage? Evidence from China

Cited by 41 publications

References 79 publications

Implications of Political Patronage and Political Costs for Corporate Disclosure

Implications of Political Patronage and Political Costs for Corporate Disclosure

What is it going to cost? Empirical evidence from a systematic literature review of audit fee determinants

Does Media Exposure Affect Financial Reporting Quality Through Auditors?

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