Empirical Study On The Impact Of "Big 4" Audit On The Privatization Of SOEs

The "Big Four" international accounting firms originated from abroad firstly,while the "Big Four" formally introduced into China and the privatization of China's state-owned enterprises started in the 1990 s.The rapid growth of Chinese economy in the past 2 decades has attract many scholars' attention to the "Big Four" audit and the privatization of state-owned enterprises,but few scholars associate the two.From the perspective of audit,this paper studies whether the "Big Four" audit will promote the process of privatization of state-owned enterprises in our country.We will also try to investigate the micro-mechanism of "Big Four" audit affecting the process of privatization of state-owned enterprises.This paper takes A-share listed companies from 2003 to 2016 in China as the sample basis of the study,and selects the ownership of listed companies and the proportion of state-owned shares as the proxy variables of privatization respectively.By using ordinary least squares model,two-stage regression model and DID model,this paper conducts the empirical study on the influence of the "Big Four" audit on privatization.The empirical result shows that state-owned listed companies are more likely to hire " Big Four " as the auditing unit.The study found that,after controlling for firm-level factors,industries and years fixed effects,the "Big Four" audit can significantly promote the privatization of SOEs.Engaging the "Big Four" to conduct audits will increase the probability of privatization of state-owned listed companies and reduce the proportion of state-owned shares in state-owned enterprises.And the longer the number of years of audited by the "Big Four",the higher the probability of privatization transfer and the lower the proportion of state-owned shares.Although the promotion effect of privatization by the "Big Four" has been weakened after the localization of the "Big Four" in 2012,the influence still exists.Further,we use audit fee as an instrument variable of "Big Four" for two-stage regression analysis,after solving some of the endogenous problems,the above conclusion still holds.For the theoretical mechanism of "big four" promoting privatization,the first one is that the "Big Four" audit can send more information about the value of the company to the market and reduce the price game in privatization by providing higher quality auditing services.Second,the "Big Four" audit showed the good reputation to the market: The companies audited by the "Big Four" audit are "better" companies,boosting the confidence of investors and reducing the information asymmetry they face in the process of privatization,to promote privatization.This paper contributes to the research in audit choice and impact of audit on the capital market.