Does financial reporting comparability improve after accounting firm mergers? Evidence from Chinese listed companies

AbstractUsing a sample of Chinese A-share firms listed on the Shanghai and Shenzhen stock exchanges from 1998 to 2012, we investigate the impact of accounting firm mergers on financial reporting comparability. We find that financial reporting comparability is significantly increased after mergers. Furthermore, post-merger integration has a positive effect on this relationship; that is, the association between auditor firm merger and financial reporting comparability is stronger when the auditor firm merger has a higher degree of integration. This paper provides empirical evidence supporting the “bigger and more competitive” policy promoted by the Chinese government in the auditing industry.