Table 4. Mechanisms Panel A: Trust and...

Table 4.

Mechanisms


Panel A: Trust and moral self-discipline: the ethics channels
	Channel = Trust						Channel = Moral
		Stage 1			Stage 2			Stage 1			Stage 2
	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)	(9)	(10)	(11)	(12)
	Trust	Trust	Trust	Big10	Big10	Big10	Moral	Moral	Moral	Big10	Big10	Big10
ln_con_1	0.015*** (33.013)			0.052*** (4.889)			0.070*** (31.385)			0.049*** (4.677)
ln_con_2		0.009*** (20.592)			0.071*** (6.935)			0.078*** (36.612)			0.067*** (6.490)
ln_con_3			0.011*** (24.662)			0.019*(1.810)			0.083*** (37.840)			0.015(1.393)
Channel				0.332*** (2.601)	0.349*** (2.756)	0.410*** (3.234)				0.135*** (5.165)	0.125*** (4.749)	0.147*** (5.601)
Controls	Y	Y	Y	Y	Y	Y	Y	Y	Y	Y	Y	Y
Industry	Y	Y	Y	Y	Y	Y	Y	Y	Y	Y	Y	Y
Year	Y	Y	Y	Y	Y	Y	Y	Y	Y	Y	Y	Y
Indirect effect				0.0019***	0.0012***	0.0017***				0.0032***	0.0032***	0.0042***
Direct effect				0.0172***	0.0238***	0.0056				0.0162***	0.0222***	0.0037
Total effect				0.0191***	0.0250***	0.0073**				0.0194***	0.0254***	0.0079**
N	33406	33406	33406	33406	33406	33406	33500	33500	33500	33500	33500	33500
Adj/Pseudo R2	0.446	0.435	0.438	0.105	0.106	0.105	0.693	0.697	0.697	0.106	0.106	0.105
Panel B: The information disclosure quality channel
Channel= disclosure score (DS)
				Stage 1						Stage 2
		(1)		(2)		(3)		(4)		(5)		(6)
		DS		DS		DS		Big10		Big10		Big10
ln_con_1		−0.040*** (−7.294)						0.009(0.712)
ln_con_2				−0.028*** (−5.216)						0.037*** (2.948)
ln_con_3						−0.024*** (−4.477)						0.003(0.207)
Channel								−0.105*** (−6.755)		−0.104*** (−6.696)		−0.106*** (−6.785)
Controls		Y		Y		Y		Y		Y		Y
Industry		Y		Y		Y		Y		Y		Y
Year		Y		Y		Y		Y		Y		Y
N		22,913		22,913		22,913		22,913		22,913		22,913
Adj R²/Pseudo R²		0.2090		0.2081		0.2078		0.091		0.092		0.091
Indirect effect								0.0014***		0.0010***		0.0009***
Direct effect								0.0030		0.0131***		0.0008
Total effect								0.0045		0.0141***		0.0017
Panel C: Mitigation of agency problems: the tunnelling channel
Channel = tunneling by large shareholders (tunnel)
				Stage 1						Stage 2
		(1)		(2)		(3)		(4)		(5)		(6)
		Tunnel		Tunnel		Tunnel		Big10		Big10		Big10
ln_con_1		−0.001** (−2.075)						0.054*** (5.256)
ln_con_2				−0.001** (−2.233)						0.069*** (7.064)
ln_con_3						−0.001*** (−2.951)						0.020** (2.032)
Channel								−1.152*** (−4.811)		−1.152*** (−4.806)		−1.151*** (−4.808)
Controls		Y		Y		Y		Y		Y		Y
Industry		Y		Y		Y		Y		Y		Y
Year		Y		Y		Y		Y		Y		Y
N		34,046		34,046		34,046		34,046		34,046		34,046
Adj R²/Pseudo R²		0.2405		0.2405		0.2406		0.105		0.105		0.104
Indirect effect								0.0001***		0.0001***		0.0020**
Direct effect								0.0181***		0.0234***		0.0064*
Total effect								0.0182***		0.0235***		0.0084*


Panel A: Trust and moral self-discipline: the ethics channels
	Channel = Trust						Channel = Moral
		Stage 1			Stage 2			Stage 1			Stage 2
	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)	(9)	(10)	(11)	(12)
	Trust	Trust	Trust	Big10	Big10	Big10	Moral	Moral	Moral	Big10	Big10	Big10
ln_con_1	0.015*** (33.013)			0.052*** (4.889)			0.070*** (31.385)			0.049*** (4.677)
ln_con_2		0.009*** (20.592)			0.071*** (6.935)			0.078*** (36.612)			0.067*** (6.490)
ln_con_3			0.011*** (24.662)			0.019*(1.810)			0.083*** (37.840)			0.015(1.393)
Channel				0.332*** (2.601)	0.349*** (2.756)	0.410*** (3.234)				0.135*** (5.165)	0.125*** (4.749)	0.147*** (5.601)
Controls	Y	Y	Y	Y	Y	Y	Y	Y	Y	Y	Y	Y
Industry	Y	Y	Y	Y	Y	Y	Y	Y	Y	Y	Y	Y
Year	Y	Y	Y	Y	Y	Y	Y	Y	Y	Y	Y	Y
Indirect effect				0.0019***	0.0012***	0.0017***				0.0032***	0.0032***	0.0042***
Direct effect				0.0172***	0.0238***	0.0056				0.0162***	0.0222***	0.0037
Total effect				0.0191***	0.0250***	0.0073**				0.0194***	0.0254***	0.0079**
N	33406	33406	33406	33406	33406	33406	33500	33500	33500	33500	33500	33500
Adj/Pseudo R2	0.446	0.435	0.438	0.105	0.106	0.105	0.693	0.697	0.697	0.106	0.106	0.105
Panel B: The information disclosure quality channel
Channel= disclosure score (DS)
				Stage 1						Stage 2
		(1)		(2)		(3)		(4)		(5)		(6)
		DS		DS		DS		Big10		Big10		Big10
ln_con_1		−0.040*** (−7.294)						0.009(0.712)
ln_con_2				−0.028*** (−5.216)						0.037*** (2.948)
ln_con_3						−0.024*** (−4.477)						0.003(0.207)
Channel								−0.105*** (−6.755)		−0.104*** (−6.696)		−0.106*** (−6.785)
Controls		Y		Y		Y		Y		Y		Y
Industry		Y		Y		Y		Y		Y		Y
Year		Y		Y		Y		Y		Y		Y
N		22,913		22,913		22,913		22,913		22,913		22,913
Adj R²/Pseudo R²		0.2090		0.2081		0.2078		0.091		0.092		0.091
Indirect effect								0.0014***		0.0010***		0.0009***
Direct effect								0.0030		0.0131***		0.0008
Total effect								0.0045		0.0141***		0.0017
Panel C: Mitigation of agency problems: the tunnelling channel
Channel = tunneling by large shareholders (tunnel)
				Stage 1						Stage 2
		(1)		(2)		(3)		(4)		(5)		(6)
		Tunnel		Tunnel		Tunnel		Big10		Big10		Big10
ln_con_1		−0.001** (−2.075)						0.054*** (5.256)
ln_con_2				−0.001** (−2.233)						0.069*** (7.064)
ln_con_3						−0.001*** (−2.951)						0.020** (2.032)
Channel								−1.152*** (−4.811)		−1.152*** (−4.806)		−1.151*** (−4.808)
Controls		Y		Y		Y		Y		Y		Y
Industry		Y		Y		Y		Y		Y		Y
Year		Y		Y		Y		Y		Y		Y
N		34,046		34,046		34,046		34,046		34,046		34,046
Adj R²/Pseudo R²		0.2405		0.2405		0.2406		0.105		0.105		0.104
Indirect effect								0.0001***		0.0001***		0.0020**
Direct effect								0.0181***		0.0234***		0.0064*
Total effect								0.0182***		0.0235***		0.0084*

Note(s): Panel A presents results for mediation tests of ethics (measured by Trust and Moral) on the selection of high-quality auditors. Panel B presents results for mediation tests of information disclosure quality (measured by DS) on the selection of high-quality auditors. Panel C presents results for mediation tests of tunneling by large shareholders (measured by tunnel) on the selection of high-quality auditors. All variables are defined in Appendix. All continuous variables are winsorized at the top and bottom 1%. Year and industry fixed effects are included. We report two-sided t-statistics computed using standard errors clustered by firm. *, ** and ***indicate significance at the 10, 5 and 1% levels

Source(s): Authors’ own work

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