Distracted Institutional Investors and Audit Risk

Research output: Conference Papers (RGC: 31A, 31B, 32, 33)32_Refereed conference paper (no ISBN/ISSN)peer-review

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Author(s)

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Detail(s)

Original languageEnglish
Publication statusPublished - Jul 2019

Conference

Title2019 Accounting and Finance Association of Australia and New Zealand Conference (AFAANZ 2019)
PlaceAustralia
CityBrisbane
Period7 - 9 July 2019

Abstract

We use a newly developed institutional investor distraction measure (Kempf et al., 2016), we examine whether auditors increase their risk assessment when clients’ institutional investors temporarily reduce their monitoring activities. We find that audit fees and audit report lags increase during periods when institutional investors temporarily focus their attention on other parts of their portfolio. This effect is stronger when dedicated institutional investors are distracted. We further show that the identified relationship declines in the post-Sarbanes–Oxley Act period. Collectively, our results suggest that institutional shareholders’ monitoring activities benefit auditors by reducing audit risk. This paper also shows that the negative effect of investors’ limited attention on corporate monitoring can be somewhat mitigated by auditors.

Research Area(s)

  • institutional investor distraction, audit risk, audit fee, audit lag

Bibliographic Note

Information for this record is supplemented by the author(s) concerned.

Citation Format(s)

Distracted Institutional Investors and Audit Risk. / Yang, Jingyu; Wu, Hai; Yu, Yangxin.

2019. Paper presented at 2019 Accounting and Finance Association of Australia and New Zealand Conference (AFAANZ 2019), Brisbane, Queensland, Australia.

Research output: Conference Papers (RGC: 31A, 31B, 32, 33)32_Refereed conference paper (no ISBN/ISSN)peer-review