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Does the mandatory disclosure of audit information affect analysts' information acquisition?

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  • Kong, Dongmin
  • Ji, Mianmian
  • Liu, Shasha

Abstract

This paper explores the effect of public information on analysts' information acquisition. By introducing the implementation of the Key Audit Matters (KAM) Disclosure Standards for China's firms cross-listed in Hong Kong in 2017, we present evidence that KAM disclosure reduces analysts' firm visits, which is an important channel of information acquisition. The effect is particularly pronounced for firms with audit partner rotation and low institutional ownership. KAM disclosure by industrial leaders has a spillover effect on analyst visits for peer firms. Disclosure also improves the frequency and quality of analysts' forecasts and firms' information environments, indicating that KAMs are informative and audit information is an important determinant of analysts' information acquisition. Our study reveals the real effect of KAM disclosure on analyst decisions, which may be of interest to regulators concerned with the mandatory disclosure of audit information and capital market efficiency.

Suggested Citation

  • Kong, Dongmin & Ji, Mianmian & Liu, Shasha, 2022. "Does the mandatory disclosure of audit information affect analysts' information acquisition?," International Review of Financial Analysis, Elsevier, vol. 83(C).
    • Handle: RePEc:eee:finana:v:83:y:2022:i:c:s105752192200237x
    DOI: 10.1016/j.irfa.2022.102281
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    More about this item

    Keywords

    Sell-side analysts; Key audit matters disclosure; Corporate site visits; Analyst forecasts; Market efficiency;
    All these keywords.

    JEL classification:

    • M42 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Auditing
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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