The joint effects of social identity and institutional pressures on audit quality: The case of the Chinese Audit Industry

Pengji Wang*, Lin Yuan, Jie Wu

*Corresponding author for this work

Research output: Contribution to journalArticle

3 Citations (Scopus)

Abstract

This article examines how social identity links institutional pressures and audit quality. Combining institutional theory and social identity theory, we theoretically argue that the interaction between social and institutional forces shapes audit quality. Through an analysis of Chinese audit firms from 2000 to 2007, we show that isomorphic imitation has a more significant effect on firms belonging to the same-identity group than firms across cross-identity groups; foreign-affiliated audit firms are more willing to conform to normative pressure from professional networks than local firms; and foreign-affiliated firms are coerced to adapt to the local government's expectation, particularly when they have a geographically concentrated customer base. We further reveal that a larger customer base attenuates within-identity group imitation but strengthens cross-identity group imitation. The results shed light on the role of social identity in shaping conformity in the audit industry, thus contributing to international convergence–divergence literature and institutional theory.

Original languageEnglish
Pages (from-to)666-682
Number of pages17
JournalInternational Business Review
Volume26
Issue number4
Early online date6 May 2017
DOIs
Publication statusPublished - Aug 2017

Keywords

  • Audit quality
  • Institutional pressure
  • Social identity

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