The Shareholding Of Institutional Investor,Client Importance And Audit Opinion

With the advent of the “supernormal development institutional investor” strategy,institutional investors have grown in size and have become an important part of the capital market.The increase in the shareholding ratio has led more and more institutional investors to abandon the use of foot voting,adopting measures such as submitting proposals,entering the board of directors,and participating in resolutions to participate in corporate governance to protect their own interests.Focusing on the corporate governance effect of institutional investors,domestic and foreign scholars have carried out multi-angle research and produced two competitive views.One view is that institutional investors cannot play an active corporate governance role,and their trading behavior will stimulate the short-term behavior of the invested company;another view is that institutional investors play an active supervisory role in corporate governance.Specifically,they can constrain management's opportunistic behavior,improve the company's internal governance,improve the quality of information disclosure,and reduce audit risk.In this practical and theoretical context,this paper attempts to explore whether institutional investors' shareholdings can reduce the probability of the non-clean audit opinions issued by the auditors,thus enriching the theoretical research on institutional investors' governance effects.In addition,this paper is based on the relationship between client importance and audit opinions,an important topic of international audit academics and practice circles,considering the impact of audit risk from the client layer on the relationship between the two,this paper took further research on the importance of important clients on the relation of institutional investors' shareholdings and audit opinions from the micro perspective.This paper uses the combination of normative and empirical research.Through the use of information asymmetry theory,rent-seeking theory,insurance theory and reputation theory,this paper theoretically analyzed the internal existence of institutional investors and audit opinions,client importance and audit opinions and then put forward the research hypothesis.In the empirical-research part,this paper selected the A-share listed companies listed on the Shanghai and Shenzhen Stock Exchange in CSMAR from 2011 to 2017 as the initial research sample,and finally obtained 14821 observations after screening.Audit opinion,the interpreted variable,is a dummy variable defined by the 0-1 dichotomy.The data of institutional investors' shareholding,the explanatory variable,comes from the RESSET database.At the same time,they are subdivided into pressure-resistant institutional investors and pressure-sensitive institutional investors based on whether they have daily trading relationships with the investee.The impact of the two types of investors on audit opinions is compared.Client importance takes the size of audited client assets as a surrogate variable.In order to verify the hypothesis,this paper carried out multivariate linear regression according to the established model.Finally,in the further test,the sub-sample regression was carried out according to the institutional environment and the nature of property rights.The results of the study show that:(1)when other conditions remain unchanged,there is a negative correlation between the overall shareholding of institutional investors and the non-clean audit opinion issued by the auditor.That is,with the higher proportion of institutional investors' shareholding,the auditors are more likely to issue standard unqualified opinions.Moreover,there is a significantly negative correlation between the pressure-resistant institutional investors' shareholding and the non-clean audit opinion issued by the auditor.Yet the increase of the pressure-sensitive institutional investors' shareholding ratio has no significant influence on the auditor's non-clean audit opinion;(2)when other conditions remain unchanged,the increasing importance of clients will weaken the negative effect of institutional investors' shareholding on non-clean audit opinions.That is,as the importance of clients increases,the relationship between institutional investors' shareholding and non-clean audit opinions changes from negative correlation to positive correlation;(3)when other conditions remain unchanged,compared with the pressure-sensitive institutional investors' shareholding,the weakening effect of client importance on the negative correlation between pressure-resistant institutional investors' shareholding and audit opinions is less.That is,the increase of the importance of clients will change the relationship between pressure-sensitive institutional investors' shareholding and non-clean audit opinions from negative to positive correlation,yet its influence on the relationship between pressure-resistant institutional investors' shareholding and non-clean audit opinions is not significant;(4)There are several conclusions in the further test: compared with that in regions with good institutional environment,the weakening effect of client importance on the negative correlation between institutional investors' shareholding and audit opinions is less in regions with poor institutional environment;compared with that in non-state-owned enterprises,the weakening effect of client importance on the negative correlation between institutional investors' shareholding and audit opinions is less in state-owned enterprises.Based on the empirical results,this paper put forward three relevant policy recommendations,and explained the limitations of this paper and the future research prospects.