Board Composition and the Dismissal of Auditor —— Empirical Evidence from China ’ s Securities Market Tao Li Zuyun Xue Tao Li Zuyun Xue Xiamen University Xiamen University March 2005 March 2005

Abstract Research subject Extant research Hypotheses development Research design Research result Conclusion

Research subject Research problem – Under the specific environment in China, how does board composition of listed company influence its decision to dismiss CPA Firms?

Motivation – Regulations in other countries IOSCO Sarbanes-Oxley Act – Situation in our country

Extant research Research in other countries – Francis & Wilson,1988 – Carcello & Neal,2003 – Lee 、 Mande 、 Ortman,2004 Research in our country – Shuang Li 、 Xi Wu ， 2000 – Jiangxin Geng 、 He Yang ， 2001 – Dongping Li et al. ， 2001 – Zhengfei Lu 、 Pan Tong,2003

Hypotheses development Institutional Background Hypotheses – H1 ： The more board members from within,the more possibility the dismissal of aduitor.

H2:Alteration of president is related to the dismissal of auditor. H3:Establishment of audit committee decreases possibility of the dismissal of auditor.

Research design Sample selection – Listed companies which dismissed CPA firms in 2002 and Definition of the variables – Explained variables Inside Change Audit

Control variables – First – Opinion – Alien – ST – Size

Model 1

Research result

Model 2

Conclusion During the research period, under the situation that the president of a listed company hold a post in the owned by the primary share holder company, the more board members from within, the more possibility dismissal for CPA Firms. Listed companies that change its president are more likely to dismiss CPA Firms.

Listed companies without dismissal for CPA Firms are more likely to establish audit committee in directorate. Listed companies with Special treatment or MAO issued are more likely to dismiss CPA Firms.

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