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Does auditor choice matter to foreign investors? Evidence from foreign mutual funds worldwide

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  • Chou, Julia
  • Zaiats, Nataliya
  • Zhang, Bohui
Abstract
This study explores whether a firm’s auditor choice affects its ability to access foreign equity capital. Using the equity holdings of 35,665 foreign mutual funds from 30 countries for the period 1998–2009, we find evidence that appointing a Big 4 auditor is associated with the increased level of foreign mutual fund ownership in firms. Our results are robust when conditioned on firm-level information asymmetries, country-level information disclosure quality, and when employing the Enron–Andersen fiasco as the natural experiment. Furthermore, appointing Big 4 auditors is particularly important for firms to attract foreign capital during the 2008 global financial crisis.

Suggested Citation

  • Chou, Julia & Zaiats, Nataliya & Zhang, Bohui, 2014. "Does auditor choice matter to foreign investors? Evidence from foreign mutual funds worldwide," Journal of Banking & Finance, Elsevier, vol. 46(C), pages 1-20.
    • Handle: RePEc:eee:jbfina:v:46:y:2014:i:c:p:1-20
    DOI: 10.1016/j.jbankfin.2014.04.005
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    More about this item

    Keywords

    Foreign mutual funds; Auditor choice; Enron–Andersen collapse; 2008 Global financial crisis;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • M42 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Auditing

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