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Auditing Quality, Investor Sentiment and Earnings Response---Evidence from the Chinese A-Share Market

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  • Ling Zhang
  • Chao Ge
  • Wun-Hong Su

Abstract

The purpose of this study is to investigate whether auditing quality mitigates the impact of the investor’s sentiment on share market response to earnings news. Auditing quality involves auditor reputation quality and auditor implicit quality. The high-quality of auditing work can not only enhance the investors’ confidence, but also reduce the transaction costs. Using 12,345 observations from the Chinese A-share market over the period 2007 to 2014, the empirical results demonstrate that the different auditing quality signals generate the distinct influences on the investors. Specifically- (1) there is an insignificant relation between auditor reputation quality and the influence of investor sentiment on share market response to earning news; (2) there is a significant association between auditor implicit quality and the influence of investor sentiment on share market response to earning news.

Suggested Citation

  • Ling Zhang & Chao Ge & Wun-Hong Su, 2018. "Auditing Quality, Investor Sentiment and Earnings Response---Evidence from the Chinese A-Share Market," Accounting and Finance Research, Sciedu Press, vol. 7(2), pages 110-110, May.
    • Handle: RePEc:jfr:afr111:v:7:y:2018:i:2:p:110
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    References listed on IDEAS

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    1. Dong, Bei & Robinson, Dahlia & Robinson, Michael, 2015. "The market's response to earnings surprises after first-time going-concern modifications," Advances in accounting, Elsevier, vol. 31(1), pages 21-32.
    2. Beaver, Wh, 1968. "Information Content Of Annual Earnings Announcements," Journal of Accounting Research, Wiley Blackwell, vol. 6, pages 67-92.
    3. Balachandran, Bv & Ramakrishnan, Rts, 1980. "Internal Control And External Auditing For Incentive Compensation Schedules," Journal of Accounting Research, Wiley Blackwell, vol. 18, pages 140-171.
    4. Balachandran, Bv & Ramakrishnan, Rts, 1980. "Discussion Of Internal Control And External Auditing For Incentive Compensation Schedules - Reply," Journal of Accounting Research, Wiley Blackwell, vol. 18, pages 182-183.
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    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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