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Article: Institutional Investor Inattention and Audit Quality

TitleInstitutional Investor Inattention and Audit Quality
Authors
KeywordsInstitutional investors
Investor inattention
Audit quality
Issue Date2021
PublisherElsevier Inc. The Journal's web site is located at http://www.elsevier.com/locate/jaccpubpol
Citation
Journal of Accounting and Public Policy, 2021, v. 40 n. 3, p. article no. 106857 How to Cite?
AbstractWe hypothesize and provide empirical evidence that higher institutional investor inattention is associated with lower audit quality. We employ an inattention measure that captures the extent to which institutional investors are distracted by attention-grabbing events irrelevant to the focal firm. Results suggest that a higher degree of institutional investor inattention is associated with a lower propensity of a going-concern opinion, a lower probability of the auditor reporting a material internal control weakness, and a higher likelihood of the audit client misstating the financial statements. Further analyses show that these associations vary by auditor litigation risk, their workload pressure, auditor industry expertise, and analyst coverage. Overall, our findings reveal that while institutional investors play an important monitoring role, the distractions they face undermine the quality of monitoring they provide.
Persistent Identifierhttp://hdl.handle.net/10722/299055
ISSN
2023 Impact Factor: 3.3
2023 SCImago Journal Rankings: 1.327
ISI Accession Number ID

 

DC FieldValueLanguage
dc.contributor.authorChan, DK-
dc.contributor.authorLi, X-
dc.contributor.authorXin, Q-
dc.date.accessioned2021-04-28T02:25:36Z-
dc.date.available2021-04-28T02:25:36Z-
dc.date.issued2021-
dc.identifier.citationJournal of Accounting and Public Policy, 2021, v. 40 n. 3, p. article no. 106857-
dc.identifier.issn0278-4254-
dc.identifier.urihttp://hdl.handle.net/10722/299055-
dc.description.abstractWe hypothesize and provide empirical evidence that higher institutional investor inattention is associated with lower audit quality. We employ an inattention measure that captures the extent to which institutional investors are distracted by attention-grabbing events irrelevant to the focal firm. Results suggest that a higher degree of institutional investor inattention is associated with a lower propensity of a going-concern opinion, a lower probability of the auditor reporting a material internal control weakness, and a higher likelihood of the audit client misstating the financial statements. Further analyses show that these associations vary by auditor litigation risk, their workload pressure, auditor industry expertise, and analyst coverage. Overall, our findings reveal that while institutional investors play an important monitoring role, the distractions they face undermine the quality of monitoring they provide.-
dc.languageeng-
dc.publisherElsevier Inc. The Journal's web site is located at http://www.elsevier.com/locate/jaccpubpol-
dc.relation.ispartofJournal of Accounting and Public Policy-
dc.subjectInstitutional investors-
dc.subjectInvestor inattention-
dc.subjectAudit quality-
dc.titleInstitutional Investor Inattention and Audit Quality-
dc.typeArticle-
dc.identifier.emailChan, DK: derekchan@business.hku.hk-
dc.identifier.emailLi, X: xuli1@hku.hk-
dc.identifier.authorityChan, DK=rp01046-
dc.identifier.authorityLi, X=rp01615-
dc.description.naturelink_to_subscribed_fulltext-
dc.identifier.doi10.1016/j.jaccpubpol.2021.106857-
dc.identifier.scopuseid_2-s2.0-85104675919-
dc.identifier.hkuros322291-
dc.identifier.volume40-
dc.identifier.issue3-
dc.identifier.spagearticle no. 106857-
dc.identifier.epagearticle no. 106857-
dc.identifier.isiWOS:000652848200001-
dc.publisher.placeUnited States-

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