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Title: The effect of auditing on promoting exports : evidence from private firms in emerging markets
Authors: Cheng, CSA 
Sun, W
Ye, K
Zhang, N
Issue Date: Apr-2020
Source: Management science, Apr. 2020, v. 66, no. 4, p. 1692-1716
Abstract: We investigate the effect of auditing on promoting exports for private firms in emerging markets. Using a sample of private firms from 125 countries between 2006 and 2015,we showthat firms that have their financial statements audited havemore exports than firms that do not have their financial statements audited. To infer causality, we employ a regression discontinuity design (RDD). Using the discontinuity around the mandatory financial audit threshold, we find that firms slightly above the threshold have more exports than do firms that are slightly below the threshold. We also exploit the countries with exogenous regulation shocks to the mandatory audits. Using the difference-in-differences (DiD) design, we find that firms that are exempted frommandatory audits have less exports subsequent to the regulation change. Further analyses reveal that the effect of auditing is more pronounced in countries with higher audit quality and for firms with limited alternative information. Our findings suggest that the auditing function promotes exports-an important economic consequence for the global economic development.
Keywords: Audit
International trade
Private firms
Emerging markets
Regression discontinuity design
Publisher: Institute for Operations Research and the Management Sciences
Journal: Management science 
ISSN: 0025-1909
EISSN: 1526-5501
DOI: 10.1287/mnsc.2018.3254
Rights: Copyright:© 2020 INFORMS
This is the accepted manuscript of the following article: Cheng, C. A., Sun, W., Ye, K., & Zhang, N. (2020). The effect of auditing on promoting exports: evidence from private firms in emerging markets. Management Science, 66(4), 1692-1716, which has been published in final form at https://doi.org/10.1287/mnsc.2018.3254
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