Internationalization Of Capital Market And Auditor’s Behavior

Since the Eleventh Central Committee’s 3rd Plenary Session carried out the reform and opening-up,the modernization of the economy has been continuously perfected,the socialism market economy is flourishing,and the fundamental policy of opening-up has obtained outstanding achievements.Deepening the internationalization of capital market is an important measure to promote the high-quality development of China’s economy and the long-term stable development goal of China’s capital market.To broaden the openness of the capital market is not only beneficial to the construction of the world economic community with a shared future,but also can introduce mature market standards,promote the continuous transformation of China’s capital market to the concept of long-term value investment,and transform non-scientific market behavior into value exploration under the condition of fair competition,so as to strengthen the efficiency of the capital market to serve the real economy.Further deepening reform and opening up in the financial sector is a key link to build a new development pattern of domestic and international double circulation.The Shanghai-Hong Kong Stock Connect was launched in November 2014,marking a key step in the two-way opening-up of China’s capital market.The Shenzhen-Hong Kong Stock Connect was officially launched in December 2016,marking the further opening-up of China’s capital market.On June 20,2018,A-shares were officially included in the Morgan Stanley(MSCI)Emerging Markets Index.Since MSCI announced the launch of the review and consultation for A-shares to be included in the MSCI index in 2013,A-shares have entered A bumpy journey,with four shocks but three failures before finally achieving success in 2017.The finance reformation and opening-up is a significant step for the stable development of the capital market,the improvement of corporate governance and the improvement of the business environment;Accelerating the opening up of the capital market and promoting the construction of laws and regulations on the capital market have become important guarantees for the reform and opening up of the financial sector.The main premise of financial opening is to connect with the international financial market,break the dilemma of "protectionism" in the financial market,and achieve equality and mutual benefit in the internationalization of the global capital market.The purpose of capital market opening is to optimize the efficiency of resource allocation and improve the liquidity of domestic and foreign capital.With the continuous development of market scale,the QFII/RQFII access threshold of China’s A-share market has been continuously lowered.The implementation of Shanghai-Hong Kong Stock Connect,Shenzhen-Hong Kong Stock Connect,Shanghai-London Stock Connect and other connectivity mechanisms reflects the strategic layout of financial opening and steady progress of financial market opening.The inclusion of A-shares in the MSCI index will greatly increase the international influence of China’s A-shares.Based on the PSM-DID model,this paper takes A-share listed companies from2010 to 2020 as samples,and investigates the influence of exogenous events of A-share inclusion in MSCI index on auditor behavior.It is found that the internationalization of capital market strengthens the selection tendency of target enterprises to high-quality auditors,and reduces the risk assessment level of auditors to enterprises.Moreover,the strengthening effect of the former is regulated by Confucian culture and market competition forces,while the restraining effect of the latter is mainly reflected in the enterprises with mature life cycle.Further research shows that,on the one hand,the internationalization of capital market can enhance the target enterprises willingness to hire high-quality auditors by attracting analysts to follow up,increasing the shareholding ratio of institutional investors and improving financial performance;On the other hand,the internationalization of the capital market reduces the auditors risk assessment level for enterprises by easing the financing constraints of the target enterprises and improving the optimism of the management tone,and it is more obvious in the samples of enterprises with higher management myopia and better internal control quality.The test of economic consequences reveals that the enterprises whose A shares are included in the MSCI index have,on the one hand,eased their own financing constraints by selecting high-quality auditors,and reduced the risk of debt default and the level of real earnings management;On the other hand,reducing auditors audit investment and audit fees will help to reduce the risk-taking level of enterprises and the probability of executive turnover.This paper not only expands the research perspective of influencing factors of auditor selection,but also provides theoretical support and useful reference for clarifying the role and function of internationalization of capital market in corporate governance.