Theme：Public Audit Oversight and Corporate Innovation: International Evidence

Speaker：Prof.HUANG YUAN（ PolyU School of Accounting and Finance）

Host：Prof.TANG XUE SONG（School of Accounting, SWUFE）
Time：15:00—16:30 , May 31, 2022 ,Tuesday

Place：Tencent Meeting  ID: 358-740-829

sponsor：School of Accounting, SWUFE

Introduction of the speaker：

Dr. Yuan HUANG is an Associate Professor of Accounting at the Hong Kong Polytechnic University. She obtained her Ph.D. in Accounting from Hong Kong University of Science and Technology. Her research interests include accounting- based equity valuation and the effect of financial reporting practices on corporate financial management decisions. Her research has appeared in the Journal of Financial and Quantitative Analysis, Journal of Accounting and Public Policy, and Journal of Accounting, Auditing and Finance.

Abstract:

This paper examines how the switch to public audit oversight affects corporate innovation output. Exploiting the staggered adoption of inspection programs worldwide and employing a difference-in-differences methodology, we find that firms have significantly more patents and patent citations following the introduction of auditor inspections, indicating a positive effect of auditor oversight on corporate innovation activities. We further explore possible mechanisms through which audit inspections spur corporate innovation: relaxed financial constraints, improved monitoring on managers, and enhanced risk-taking by CEOs. Additional analyses show that 1) audit quality improvement around POB establishment has a direct effect on innovation outcomes, and 2) firms are engaged with more explorative innovation activities after the establishment of POBs and these patents (and patent citations) have a stronger positive association with firm value. Collectively, our study sheds light on how public auditor oversight affect the real economy from an international setting.