| The accounting information transparency embodies the adoption of information disclosure strategy by listed companies in the specific system and circumstances.It is the product of balancing the benefits and costs of information disclosure and shows the quality and quantity of the accounting information disclosed.It is the comprehensive reflection of the impact of corporate governance,operation state,the controller's motivation,system,culture etc.The transparency of accounting information is a comprehensive indicator of the quality of accounting information.The improvement of transparency helps to reduce the financing costs,improve the efficiency of resource allocation and protect the interests of investors.The factors that affect transparency include macro factors,external governance mechanisms,internal governance mechanisms,corporate characteristics,etc.Scholars have analyzed the influence factors and economic consequences of transparency from different angles,but little literature focuses on the potential interaction among different influence factors.The governance effects of security analysts and auditors as an external governance mechanism on restraining earnings management and improving transparency have been confirmed by relevant literature.Considering the characteristics of the transitional economy in China,the paper studies the mechanism that how auditors and analysts can improve transparency and how analysts utilize the audit information and give feedback.The moderating effect of analyst coverage on audit governance is also verified.The paper is divided into three modules: literature review,theoretical analysis and institutional background,empirical test.The part of literature review first introduces the meaning and measurement of the accounting information transparency and then discusses the factors affecting transparency from four angles,including macro factors,external governance mechanisms,internal governance mechanisms and company characteristics.It also expounds the economic consequences of transparency from the aspects of reducing financing costs,improving the quality of analysts' forecast,increasing the investment efficiency and promoting enterprise value.Analysts and auditors are two external governance mechanisms that affect transparency.Analysts are important information intermediaries in the capital market.The process that analysts participate in the market is actually the all-round intervention,including the collection,processing and dissemination of information.Analysts focus on improving the transparency by influencing the earnings management through constraint mechanisms,pressure mechanisms and cooperation mechanisms.The demand for auditors appears because the audit can improve the quality of accounting information and effectively allocate financial resources through signal transmission.The essential function of audit is to improve the credibility of financial information and enhance the value of financial information.Similar to discussing the governance effect which analysts focus on,this paper expounds the governance effect of auditors on improving accounting information quality from two dimensions: earnings management and transparency.The governance effect of analysts and auditors on improving accounting information transparency has been confirmed but whether analyst following,analyst earnings forecasts,investment ratings and other information are focused on by auditors and then affect auditors' behavior is still in question.The audit report is the assurance of the quality of accounting information but whether analysts pay attention to audit opinions,audit fees,auditor change and other information when interpreting the behavior of listed companies is unknown.This paper discusses the interaction between analysts and auditors,the two external governance mechanisms,from the following two dimensions: the impact of analyst coverage on audit quality and the impact of audit quality on analyst coverage.Relevant literature indicates that transparency measurement lacks clear standards and affecting factors of transparency are almost analyzed from a certain angle,so that the relationships among various factors are separated and it is hard to distinguish major factors from minor factors.There is little literature on moderating effect of analyst coverage on audit governance,the starting point of this paper.In the part of theoretical analysis,using agency theory and signal transmission theory,the mechanism of the influential factors of transparency is analyzed from the angle of internal incentive and external pressure.Transparency is the result of mutual influence and restriction between internal incentive and external pressure.As the external pressures that affect transparency,analysts and auditors mutually constrain and interact instead of being independent of each other.This paper expounds the governance effect of analysts by using principal agent theory and asymmetric information theory,and the governance effect of independent audit,using agency theory,information theory and insurance theory.The research on transparency cannot ignore the characteristics of China's transitional economy.In the part of the analysis of institutional background,this paper uses information disclosure evaluation results for listed companies from the Shenzhen Stock Exchange to measure transparency.It also analyzes the status quo of transparency for listed companies from 2001 to 2015 and the development process of transparency from two dimensions of corporate irregularities and audit opinion.Overall,transparency of listed companies is on the rise.In recent years,the number of violations of listed companies increased significantly and the proportion of non-standard audit opinions decreased.It means that transparency is a dynamic index and it is the result of the combination of internal and external causes.Through external regulation and mandatory disclosure,companies can maintain a certain degree of transparency.Through internal incentives,companies can voluntarily disclose more information and enhance long-term transparency.In the empirical part,focusing on three issues:First,the negative impacts of auditor change and abnormal audit fees on transparency are studied.Taking into account the company's motivation to avoid unfavorable audit opinions,this paper examines the effects of auditor change and abnormal audit fees on transparency when companies were issued non-standard audit opinions in the previous period.It also verifies whether firms with opportunistic motives can weaken auditor independence and reduce accounting information quality through auditor change or abnormal audit fees.Results show that if companies have been issued abnormal audit opinions in the previous period,the transparency will be lower and the companies are about to change auditors.Distinguishing the type of auditor change,it can be found that the same level changes can better convey negative accounting information,including the impairment of independence and the decrease of transparency,and serve as more effective warning signs.If companies have been issued abnormal audit opinions in the previous period and also have paid abnormally high audit fees,transparency will be lower.Distinguishing the trend of abnormal audit fees,it can be found that if companies have been issued the non-standard audit opinions in the previous period and have paid positive abnormal audit fees,transparency will be lower.Negative abnormal audit fees do not appear to show lower transparency because it may reflect stronger client bargaining power,which may be the result of the audit market competition.The results show that audit collusions do exist between listed companies and auditors.If listed companies are issued non-standard audit opinions,they tend to improve the audit opinion through paying higher audit fees or changing auditors.The behavior of listed companies impairs auditor independence and reduces the quality of accounting information.This paper verifies the negative effects of auditor change and abnormal audit fees on transparency,which provides a new perspective for investors and regulators to identify audit collusion and screen accounting information quality.Regulators should pay attention to the problem that audit collusion leads to the failure of supervision.Especially companies that change auditors of the same level or pay abnormally high audit fees have a more intense motive to collude and regulators should strengthen the monitoring of such behavior.When investors interpret accounting information,they should focus on auditor change,abnormal audit fees and other warning information,especially for companies that are issued non-standard audit opinions in the previous period,change auditors of the same level or pay abnormally high audit fees.The transparency of companies like this is lower and their accounting information quality is worse.Second,how analysts interpret the signals of auditor change is analyzed.The reason of auditor change is complex and difficult to grasp.Accounting divergence,financial distress,audit opinion purchase,cost reduction and other factors may lead to auditor change.Analysts are an important force to participate in the external governance of the company,and they are an important information link between listed companies and investors.At present,most of the researches on the role of analysts focus on investment decisions,market efficiency,earning management and so on.There is little literature on how analysts interpret the signals of auditor change.It is found that for companies that changed auditors,analysts coverage significantly decreased.Considering the characteristics of companies,it is shown that if key customers,companies that have listed for a long time and state-owned enterprises change auditors,analyst coverage will significantly decline;if general customers,companies that have listed for a short time and private enterprises change auditors,analyst coverage will not significantly decline.Why do analysts pay less attention to these companies of auditor change? Further studies show that analysts are worried that these companies have the motive to purchase audit opinion and pay less attention to the companies which have been issued non-standard audit opinions in the previous period and changed auditors in this period.There is a significant negative correlation between them.Distinguishing types of auditor changes,the results show that analysts will treat auditor downgrade,peer and upgrade change differently.They think potential risk of auditor changes at the same level is higher and the motive for shopping audit opinions is stronger if companies have been issued the non-standard audit opinions in the previous period.This shows that when analysts pay attention to auditor change,they will comprehensively interpret and analyze combined with company characteristics from various perspectives.Once analysts perceive the risk of audit collusion,they pass risk information to the capital market by abandoning the tracking.In this way,analysts remind investors to be cautious of such companies.For companies with potential risks and abnormal behavior,it helps to improve the accuracy of earning forecasts and investment ratings and maintain the reputation and industry status of analysts through giving up tracking.Therefore,regulators can detect abnormal behavior in time and investigate it.Audit collusion is hidden and it is difficult to identify it.The tendency of audit collusion exists when companies have been issued the non-standard audit opinions in the previous period and changed auditors in this period.Analysts can make reasonable response to the auditor change.Therefore,analysts can not only play the role of information intermediary,but also play the role of corporate governance.Analysts can supervise and feedback on abnormal behavior of listed companies.Investors can interpret signals passed by analysts through the change of analyst coverage.The companies with higher analyst coverage have greater potential for development.The companies with lower analyst coverage have poorer development prospects or greater investment risk.According to it,investors can invest selectively.Securities regulators should strengthen inspections and supervision on those companies with lower analyst coverage,which prompts companies to disclose more valuable information and reduces the risk of investors.Third,from the perspective of accounting information transparency,the moderating effect of analyst coverage on audit governance is verified.Auditors are a continuously effective external supervision power of the capital market,which is an important governance mechanism to ensure the quality of accounting information.Audit quality affects the accuracy of analyst earnings forecasts,and analysts' follow-up helps to reduce audit fees.Analysts can identify the risks of audit collusion and warn the capital market by giving up tracking.The existing literature examined the influence of auditors and analysts on transparency respectively.Although the mechanisms of auditors and analysts that play the governance effect are not the same,different external governance mechanisms are not independent,but as an organic whole and play governance effects on corporate information disclosure,business decisions,etc.Some governance mechanism plays a role,being affected by other mechanism.Two governance mechanisms may have substitution effects or complementary effects.This paper studies the impact of analyst coverage,auditor change and abnormal audit fees on transparency.Research shows that analysts can have an external governance effect and improve transparency.From the perspective of auditor change and abnormal audit fees,results show that analysts not only have a regulatory governance effect,but also have a moderating effect which inhibits the negative effects of auditor change and abnormal audit fees on transparency.Considering the economic dependence of auditors on key customers may impair their independence,this paper divides the sample into important customers and general customers based on the importance of customers.It is found that auditors maintain high independence for key customers,and their practice is cautious.The phenomenon that auditor change and abnormal audit fees reduce the transparency is not observed.Although there may be collusion between auditors and customers for general customers,analysts can play a strong role of external oversight.Even if there are auditor change or abnormal audit fees,the higher the analyst coverage is,the higher the transparency becomes.Distinguishing the directions of abnormal audit fees,it is found that positive abnormal audit fees reduce transparency.Analysts have a moderating effect and weaken the negative correlation between positive abnormal audit fees and transparency.The phenomenon that the negative abnormal audit fees significantly reduce the transparency is not observed,so the moderating effect of analyst coverage on the negative abnormal audit fees is not obvious.The results show that auditors and analysts are two different external governance mechanisms.Although their mechanisms are different,they restrict and influence each other,which can improve the effect of external governance.At present,China's capital market is in the period of reform and development and the reform of IPO registration system which is based on information disclosure is in the trial run stage.Due to the lag of the capital market management and legal system construction,corporate internal governance and internal control system are not perfect.Agency has integrity problems in the practice.Some listed companies' accounting information is distorted and their information disclosure is delayed or incomplete.Therefore,the analyst industry should be developed and analysts should be encouraged to establish industry expertise.This helps to strengthen the external supervision,standardize the capital market and improve the efficiency of the capital market.In this paper,transparency is regarded as the core and auditor change,abnormal audit fees and analyst coverage as the main line.Based on the literature and theories related,the effect and mechanism of auditor change and abnormal audit fees on transparency are discussed through theoretical analysis and empirical test.In order to analyze the relationship between auditor change and analyst coverage,analyst coverage is regarded as a moderator variable to study whether moderating effect of analyst coverage is helpful to increase transparency when auditor governance effect is weakened.This paper innovates from the following three aspects:Firstly,this paper verifies the negative impact of weakening auditor independence on transparency from the perspective of auditor change and abnormal audit fees.Taking into account the motivation of companies to avoid adverse audit opinions,this paper examines the impact of auditor change and abnormal audit fees on transparency when companies were issued non-standard audit opinions in the previous period.This paper verifies that firms with opportunistic motives collude with auditors through changing auditors or paying abnormally high audit fees,which weakens auditor independence and reduces accounting information quality.Secondly,this paper interprets the signal sent by auditor change from the perspective of security analysts.Accounting divergence,financial difficulties,audit opinion purchase,reducing audit fees,seeking high-quality audit services and other factors may lead to auditor change.Regulators and investors worry that the reason for auditor change is less justified than that announced by listed companies.As an information intermediary of the capital market,how do analysts treat the phenomenon of auditor change? There is little literature to study this.This paper studies auditor change behavior from the perspective of analysts.It provides an intuitive and effective way to interpret the phenomenon of auditor change in the capital market,and provides new evidence for the confirmation of the supervisory governance effect of analysts.Finally,this paper verifies that the moderating effect of analyst coverage on audit governance from the perspective of accounting information transparency.This paper combines the two external governance mechanisms of auditors and analysts,and find that the higher the analyst's attention,the weaker the negative impact of the auditor change and the abnormal audit fees on the transparency of accounting information.From the point of view of customer importance,it is found that the moderating effect of analysts is only significant for general customers,which confirms from a new perspective that the auditors maintain cautious and independent for important customers.From the perspective of accounting information transparency,this paper verifies that the moderating effect of analyst coverage on audit governance.It provides a new perspective for the capital market to interpret the phenomenon of auditor change and abnormal audit fees,and provides new evidence supporting the regulatory effect of auditors and analysts. |
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