Switching Cost and Signaling Effect: A Test Based on CSRC Punishment

Abstract

Abstract:

We use 27 firms punished by CSRC from 1999 to 2016 to study the customer alteration after CSRC punishment and find customers owning high-quality finance statements will leave the original firms while those who focus on audit discount and intimate relation-ship with auditors cooperated for a long time will choose to stay. The results show high switching cost will adjust signaling effect while lower audit fees and long-period cooperation between auditors and customers will increase the switching cost and decrease signaling effect. This will retard the customer loss. However this kind of adjustment cannot change the fact that customers whose financial statement quality is high will still choose to leave.

Key words: firm-client relationship, switching cost, signaling effect, CSRC punishment

Li Xiaohui, Sun Longyuan. Switching Cost and Signaling Effect: A Test Based on CSRC Punishment[J]. , 2018, 30(9): 199-208,267.

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