Abstract: Encouraging the active exercise of rights by minority shareholders is a significant part of “people-oriented” regulatory approach. This paper utilizes manually collected data on the random inspection of audit firms and voting data from minority shareholders on the reappointment of auditors to explore whether the China Securities Regulatory Commission’s random inspection of audit firms can motivate minority shareholders to participate in auditor-related proposals. Empirical results reveal that random inspection of accounting firms significantly increases the rate of dissent among minority shareholders of regulated audit firm clients towards the reappointment of auditors, particularly in situations characterized by poor auditor reputation, low audit quality, and weak external supervision. Mechanism tests show that by drawing the attention of both the market and minority shareholders, and keeping minority shareholders in the loop, random inspection of audit firms makes minority shareholders willing to express their dissent from audit proposals. Further analyses indicate that random inspection of audit firms enhances the likelihood of regulated clients changing auditors and the rate of minority shareholders’ dissent from annual report proposals. Moreover, it exhibits spillover effects across both audit offices and within the industry. The conclusions of this paper provide a new theoretical perspective and empirical evidence on how random inspection of audit firms affects minority shareholders’ intention to vote against audit proposals, and also offer potential approaches for regulatory authorities to guide minority shareholders towards active participation.

Key words: random inspection of audit firms, shareholder voting, minority shareholders’ dissent, securities regulation