Critical Audit Matters, Cross Listings and Trading Volume: Evidence from Emerging Markets
Posted: 24 Nov 2020
Date Written: September 22, 2020
In this paper, we investigate the market reaction to the disclosure of critical audit matters (CAM) in terms of trading volumes and the effect of cross-listings on such a reaction in the emerging markets of China. We find that the first time CAM disclosures increase auditor report’s value as there are significant and negative abnormal trading volumes for firms disclosing CAMs. Such results are significant for companies listed only within the domestic exchanges. The alleviation of information asymmetry and the improvement of audit quality both play significant roles in investors’ reaction to the CAM disclosure. Overall, this study supplements the empirical studies on CAMs, and have implications for accounting firms, investors and other stakeholders in China and other emerging markets.
Keywords: Critical Audit Matters (CAMs), trading volume, cross-listing, information asymmetry, audit quality
JEL Classification: G14, M40, M42
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