Time：June 6, 2016（Monday）10:00-11：30
Venue：Room 501, Jiageng Bld 2
Topic： The Strategic Use of Multiple Auditors and Intragroup Propping: Evidence from Family Business Groups
Presenter：Wenming Wang, Assistant Professor of Accounting, Hong Kong Baptist University
Chair：Jinshuai Hu, Associate Professor of Accounting, Xiamen University
Abstract：
The business groups create more complex auditor choice for their member firms than the typical Big 4 vs. non-Big 4 auditor choice. The controlling families could take advantage of hiring multiple auditors rather than a single auditor if such a choice achieves a “divide and conquer” strategy, which might weaken the effectiveness of monitoring imposed by auditors. This study investigates whether the appointment of multiple auditors within family business groups leads to constrain or exacerbate member firms’ intragroup propping, which could be a manifestation of agency conflicts between the controlling families and minority shareholders. Following Bae, Cheon, and Kang(2008), we capture the intragroup propping potentials via the positive association between stock returns for announcing and non-announcing member firms around earnings announcements. We find that the positive stock returns association grows stronger around earnings releases by member firms when their groups hire multiple auditors ( especially, non-Big 4 auditors paired with Big 4 auditors) than a single Big 4 auditor. This implies that the multiple-auditor setting within family business groups impairs auditors’ monitoring role that could curb the controlling families’ ability to divert member firms’ resources for intragroup propping.
Presenter Introduction：
Wenming Wang earned his PhD, master and BA degree in Accounting from Hong Kong Baptist University, Xiamen University, and China University of Petroleum respectively. He has published papers in journals such as Journal of Business Ethics, Journal of Banking and Finance, and Financial Management.