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Confucianism and auditor changes: evidence from China

Chengang Ye (Business School, University of International Business and Economics, Beijing, China)
Yanyan Wang (Business School, University of International Business and Economics, Beijing, China)
Yongmin Wu (Business School, University of International Business and Economics, Beijing, China)
Ming Jiang (School of Business, Qingdao University of Science and Technology, Qingdao, China)
Yasir Shahab (School of Accounting, Xijing University, Xi’an, China)
Yang Lu (Business School, University of Central Oklahoma, Edmond, Oklahoma, USA)

Managerial Auditing Journal

ISSN: 0268-6902

Article publication date: 12 May 2022

Issue publication date: 28 June 2022

528

Abstract

Purpose

The purpose of this study is to examine the impact of Confucianism on auditor changes by highlighting the role of the cultural embeddedness mechanism in audit contracts from the perspective of credit governance.

Design/methodology/approach

Using a unique sample of Chinese A-share listed firms from 2008 to 2018, this study uses logit regression as the baseline methodology while controlling for macro-level factors and firm-level characteristics, as well as industry and year fixed effects. This study also conducts different mediation/channel analyses, endogeneity tests (using two-stage least squares and difference-in-differences techniques) and robustness checks.

Findings

The findings show that the embeddedness of Confucianism in a corporation reduces auditor changes. Furthermore, the channel analyses (using moral self-discipline, social trust, professional ethics and the quality of accounting information as four potential channels) reveal that Confucianism can improve moral credit and consolidate the cultural foundation of credit governance. Specifically, the stronger the embeddedness of Confucianism, the more stable the auditing contract. Finally, Confucianism in formal and informal systems can be mutually substituted.

Originality/value

There is limited research on how culture affects auditing contracts. This study offers new contributions and extends the literature on the connection between cultural embeddedness and contract stability. Confucianism has the potential to strengthen the efficiency of credit governance and maintain the stability of contracts. This study offers a thoughtful orientation toward duly using Confucianism vis-à-vis credit governance.

Keywords

Acknowledgements

The authors acknowledge the financial support from “National Natural Science Foundation of China,” for “Research Fund for International Young Scientists,” Grant Number: 72150410446 and “Funds for High-Level Talents of Xijing University (2019),” Grant Number: XJ19B02.

Citation

Ye, C., Wang, Y., Wu, Y., Jiang, M., Shahab, Y. and Lu, Y. (2022), "Confucianism and auditor changes: evidence from China", Managerial Auditing Journal, Vol. 37 No. 6, pp. 625-656. https://doi.org/10.1108/MAJ-06-2021-3184

Publisher

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Emerald Publishing Limited

Copyright © 2022, Emerald Publishing Limited

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