Publication Type
Working Paper
Publication Date
4-2019
Abstract
This paper examines whether there is information sharing between mutual funds and their auditors about the auditors’ other listed firm clients. Using detailed hand-collected data from the Chinese market and employing levels, changes, and PSM analyses, we find that mutual funds earn higher profits from trading in firms that share the same auditors. The effects are more pronounced when firms have a more opaque information environment and when the audit partners for the fund and the partners for the listed firm share school ties. The evidence is consistent with information flowing from auditors to mutual funds, providing mutual funds with an information advantage in firms that share the same auditors. We further find that auditors benefit by charging higher audit fees for mutual fund clients and by improving their audit quality for listed firm clients. Our study provides evidence of bi-directional information sharing between two important market intermediaries.
Keywords
Information Sharing, Mutual Funds, Auditors, China, Mutual Fund Investments, Trading Profits, Emerging Markets, Guanxi, Audit Quality, Audit Fees
Discipline
Accounting
Research Areas
Corporate Reporting and Disclosure
First Page
1
Last Page
59
Identifier
10.2139/ssrn.3313541
Publisher
SSRN
Citation
HOPE, Ole-Kristian; RAO, Pingui; XU, Yanping; and YUE, Heng.
Information sharing between mutual funds and auditors. (2019). 1-59.
Available at: https://ink.library.smu.edu.sg/soa_research/1786
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
http://doi.org/10.2139/ssrn.3313541