Abstract:
Purpose ¿ The purpose of this paper is to determine whether audit opinions matter in China after the introduction of several key regulatory changes, specifically aimed at strengthening the confidence of investors in the audit function. Design/methodology/approach ¿ The question is addressed by examining the market response to modified audit opinions of companies listed on the Shanghai Stock Exchange. Findings ¿ In contrast to earlier research, this paper does not find evidence that modified audit opinions have significant information value to Chinese investors, despite the regulatory changes. However, when partitioning the sample by year, there is weak evidence of a stock price response to modified audit opinions in 2003. Examination of the impact of different types of audit opinions shows no consistent results.
