Institutional Investors, Auditors Choice and Opinion

Using the data of Chinese A share listed companies, this paper studies the influence of institutional investors on auditors choice and opinion. The results show that firms are more likely to employ big auditor firms and get clean opinion when institutional investors fund higher proportion of holdings. At where law protection is weak, the influence above is greater. This results indicate that Chinese institutional investors can improve the environment of auditing as well as the governance level, and they are the substitute governance mechanism to outside governance ones such as law. This paper contributes to the literatures about the corporate governance role of institutional investors and auditors choice, and provides evidence for decision making institutions.