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Essays on corporate reporting and auditing

Ge, X. (2022). Essays on corporate reporting and auditing. (Unpublished Doctoral thesis, City, University of London)


This thesis includes three essays in corporate reporting and auditing.

Chapter 1 studies how institutional blockholdings affect firm voluntary disclosure. We document that concentrated institutional ownership reduces firms’ voluntary disclosure measured by the propensity to issue management forecasts, comprehensiveness of guidance, propensity to engage in conference calls, and the number of 8-K filings. We identify two channels through which blockholders affect firms’ voluntary disclosure. First, blockholders have easier access to managers and substitute private for public information acquisition. Second, a higher proportion of non-monitoring blockholders with low demand for voluntary disclosure, such as passive blockholders, reduces the firm’s incentive to provide voluntary disclosure. The results are robust to endogeneity and reverse causality concerns. Our study identifies an important effect that concentrated ownership has on firm corporate disclosure.

Chapter 2 examines how an increase in the audit market competition affects the incumbent accounting firms’ audit quality. Our setting is a quasi-natural experiment related to the government-supported emergence of second-tier domestic accounting firms in China. We use this shock to perform a difference-in-differences test focused on the incumbent Big 4 firms’ response to new competition, which we instrument by the industry-level variation in second-tier firms’ market share change. We find that the audit fees and audit quality of Big 4 firms decreased in response to the increased competition from second-tier firms. The result of audit quality reduction is mainly driven by industries with lower initial Big 4 dominance. Our results highlight that increased competition, as captured by a larger number of audit firms, can reduce average audit quality, which contrasts the frequent regulatory opinion that more competition in the audit market will improve audit quality.

Chapter 3 identifies a new channel through which audit market competition affects audit quality of incumbent Big4 audit firms—auditor to client assignment. We use the same setting as in Chapter 2 which is the government-supported emergence of second-tier domestic accounting firms in China as a shock to the incumbent Big 4 firms’ audit market competition. To identify how the Big 4 re-assign auditors to clients in response to changes in audit market competition, we make use of the signing-auditor level data and measure the auditor’s experience and workload. We find that Big 4 firms assigned less experienced auditors to the industries with high competition and burdened them with more workload. These auditor re-assignments help to explain the negative effect of competition on Big 4 firms’ audit quality.

Publication Type: Thesis (Doctoral)
Subjects: H Social Sciences > HF Commerce > HF5601 Accounting
H Social Sciences > HG Finance
Departments: Bayes Business School
Bayes Business School > Bayes Business School Doctoral Theses
Doctoral Theses
Text - Accepted Version
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