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Using 45 Initial Public Offerings (IPOs) on the Shanghai Stock Exchange in 1993, we find that the average initial period return is 594 percent or 2.44 percent per day between the offer date and the listing date. Our results support the political persuasion hypothesis that has been postulated in previous studies on IPOs in other emerging markets. An IPO in China is also a newly privatized firm. Based on a subset of the IPO sample, we find significant increases in profitability and productivity after privatization. But the improvement in performance is not strongly related to the percentage of total shares retained or controlled by the government.

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Purpose This paper aims to examine the merit of an indirect payment system for audit fees, a system where an intermediary collects fees from the auditee and then pays this audit fee to the auditor. Design/methodology/approach Big 4 auditors and professional analysts in South Korea participated in an experiment and survey to investigate whether the change in the payment channel (from direct to indirect) of audit fees positively impacts auditors’ decision-making. Findings The authors find evidence that the indirect payment of audit fees is positively associated with professional skepticism. Research limitations/implications This paper, by highlighting the potential for alternate auditor payment channels to improve the quality of auditor judgments, motivates future research in this area. Practical implications Qualified by the need for further research, the potential merit in an indirect payment system may have implications for audit regulators. Social implications An indirect payment channel has the potential to improve public perceptions of the audit function, thereby elevating society’s confidence in auditor opinions and improving the effectiveness and efficiency with which scarce resources are distributed within society. Originality/value This study is one of the first that looks into a systematic change in audit fee payment channel and how an indirect payment system of audit fees impacts professional skepticism.

Sang phill Kim, Col lege of Man age ment, Uni ver sity of Mas sa chu setts, Low ell Ala hassane Di allo, Col lege of Busi ness, East ern Michi gan Uni ver sity and Law rence Klein , Depart ment of Ac count ancy, Bent ley Col lege Ab stract