Research On The Market Reaction To Auditor Switches Of Listed Companies In A-share Market

Financial report is the only way for investors to learn about listed companies' financial information. However, the capital market is information asymmetric. Therefore, in order to improve the effectiveness and reliability of the information reported, listed companies must engage an accounting firm to audit the financial reports of the company. The auditor is regarded as an independent third party. In recent years, more and more companies change the auditors. We must pay more attention to this situation.This paper started with theoretical study and analyzed the current situation of auditor switches. Through the empirical study, I selected 93 sample companies which changed auditors in the past 3 years. The paper researched the market reaction to auditor switches using event study. I also grouped the sample companies according to the financial situation and willingness to change: The financial situation group included the financial distress group(ST companies) and the non-financial distress group; the willingness to change group included the voluntary change group and non-voluntary change group.And then I did the same research using the same method. The research result stated that the market did not react significantly to the event. It showed that the announcement of auditor switches did not have information content. Investors paid little attention to this event. It's likely that listed companies change auditors in order to manage earnings or purchase audit opinions. However, investors seemed to be unaware of that.This paper analyzed the empirical results of the three sample groups. When the firm commissioned to produce the auditor switching behavior, the market would have a negative reaction, but the results did not pass the test of significance. As for the sample groups of financial distress group and non- financial distress group, there existed difference about market reaction,but the result of difference did not pass the test of significance either. As for the involuntary change group and the voluntary change group, the difference between the market reaction to switch accounting firm was not significant.Finally I gave some advice about policy suggstions in the end of the this paper: Improve the work of imformation disclosure when listed companies changed accouting firms; Improve the corporate governance structure of the company, establish the Audit Committee to supervise and inspect the work of the accounting firms in order to enhance the independence of the accouting firms; Increase the intensity of punishment of false imformation disclosure; Improve the compensation mechanism to constraint the behaviors of listed companies.