Capital Market Effects of Simultaneous Audit Partner Rotations: Evidence from China

SYNOPSIS We investigate whether simultaneous audit partner rotations are associated with capital market outcomes. Our results show that companies disclosing simultaneous rotations experience lower market reactions to unexpected earnings (i.e., lower earnings response coefficients), higher costs of equity, increased risk of future stock price crashes, and reduced earnings predictability. These findings are consistent across various measures and model specifications, including comparisons with companies that have no rotations, staggered rotations, or staggered voluntary rotations. Our findings support regulators’ claims that disclosing audit partner names can be valuable to capital markets and suggest that revealing the names of additional audit partners provides unique insight. Data Availability: Data are available from the public sources identified in the text. JEL Classifications: M41; M42; M48; P50.