The Influence Of Investment Opportunity Set To The Auditor Choice

The investment opportunity set (IOS) consists of all the positive NPV projects owned by the corporation in the future. Because the high investment opportunity set can forecast the bright prospects of the corporation, so, in the capital market, the investment opportunity set of the corporation is regard as the Leading indicator of the future value and growth room of the corporation, which captures the eager attention of the vast investors. But we should also know that, the growth of the investment opportunity set can make the business of the corporation become more complication, make the actions of the managers become harder to be observed, let the corporation’s management lever have more chance to grab their private interest and then cut down the future value of the corporation. In a word, as the growth of the investment opportunity set, the information asymmetry and the agency problem may become more serious. Comparison with the probability of raising the corporation’s value by the benefit of the investment opportunity set, the hazard brought by the investment opportunity set should be paid more attention. Therefore, how to crab the serious agency conflicts brought by the investment opportunity set becomes the hot topic of the academia. The existing research reveals that independent audit is an external institution, which can be used to instead the internal organization. SO, if the corporation’s investment opportunity set becomes higher, the corporation is more likely to hire high quality auditors to relieve agency conflicts. However, when reviewing the existing literature, it can be found that little literature refers that the corporations with large investment opportunity set tend to hire high quality auditors. Discussion on this issue can help to clear the conduct of the senior executives, and then help the relative government sector to make the right policy direction.Therefore, based on the principle-agent theory, debt governance theory and auditing requirement theory, this paper construct the analysis framework to research the relationship between the feature of the investment opportunity set and the requirement of the high quality audit services. At the same time, through empirical analyzing, the data of the2009-2011A-share listed companies is used to exam the relationship between the feature of the investment opportunity set and the requirement of the high quality audit services, and to make further study, this paper tested whether the nature of the controller and the institutional environment make influence to the relationship between the feature of the investment opportunity set and the action of auditor chosen. This research found that:firstly, the feature of the investment opportunity set is an important factor to influence the action of the auditor chosen. Specifically speaking, the companies with higher investment opportunity set are more likely to hire high quality auditors to release the agency conflicts. Secondly, according to the nature of the controller, this research discriminated the full sample to SOEs and NSOEs, and found that, the governance abilities of the NSOEs are relatively weaker than SOEs, so the incentives of the NSOEs to choose high quality auditors are stronger, which can supplement their weak governance. Thirdly, spiting the whole sample by the progress of the marketing, the ownership of the company, the institutional environment respectively, we found that if the NSOEs are in the place with lower progress of marketization, lower legal governance lever, or more governance interference, then their intention of hiring high quality auditor may be more stronger.The first part is introduction. In this part, it introduces the background of the investment opportunity set and the agency conflicts, the aim and meaning of writing this paper, and the framework of the whole thesis; In the second part, it reviews the exiting literature both in China and foreign countrise, in this part, this paper reviewed the thesis about the influence of the investment opportunity set to the action of the company, and the thesis about the factors to influence the choice of the auditors, then make some comments for these papers. In the third part, it analyses the basic theory about the investment opportunity set and the auditor choice, including the theory summary of the investment opportunity set and the choice of the auditor. In the fourth part, it analyses the relationship between the investment opportunity set and the choice of the auditor. Then based these theory, this paper develops the hypothesis of this thesis. In this part, this paper analyses the relationship between the investment opportunity set and choice of the auditor at the angle of full data sample, different company ownership and institution environment sample, respectively. The fifth part is the empirical examine, including data sources, the definition of variable, the analysis of the multiple regression result, and the robust test; The sixth part is the result and advise of this research.