Confucianism and auditor changes: evidence from China
ISSN: 0268-6902
Article publication date: 12 May 2022
Issue publication date: 28 June 2022
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
:Emerald Publishing Limited
Copyright © 2022, Emerald Publishing Limited