Critical Audit Matters, Cross Listings and Trading Volume: Evidence from Emerging Markets

Posted: 24 Nov 2020

See all articles by Haiyan Zhou

Haiyan Zhou

University of Texas Rio Grande Valley

Heibatollah Sami

Lehigh University

Zhiying Hu

University of Science and Technology Beijing - Dongling School of Economics and Management

Date Written: September 22, 2020

Abstract

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

Suggested Citation

Zhou, Haiyan and Sami, Heibatollah and Hu, Zhiying, Critical Audit Matters, Cross Listings and Trading Volume: Evidence from Emerging Markets (September 22, 2020). Available at SSRN: https://ssrn.com/abstract=3697579

Haiyan Zhou (Contact Author)

University of Texas Rio Grande Valley ( email )

1201 W. University Drive
Edinburg, TX 78541
United States

Heibatollah Sami

Lehigh University ( email )

Bethlehem, PA 18015
United States
610-758-3407 (Phone)

Zhiying Hu

University of Science and Technology Beijing - Dongling School of Economics and Management

30 Xueyuan Road, Haidian District
Beijing, 100083
China

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