China Accounting and Finance Review

, 17:8

First online:

Open Access This content is freely available online to anyone, anywhere at any time.

Information Content of Text in Chinese Audit Opinions *

  • Ziye ZhaoAffiliated withInstitute of Accounting and Finance, Shanghai University of Finance and Economics Email author 
  • , Minhua LinAffiliated withLaboratory of Financial Information Technology, Shanghai University of Finance and Economics


This paper investigates the economic consequences of text in Chinese modified audit opinions. We find that negative text is related with positive market response. We also find that the market premium of negative text is more pronounced for companies that suffer losses, disclose conflicts between the board and auditors, or do not fire their top executives after receiving modified audit opinions. Furthermore, the more patents a company applies for, the stronger the economic consequences of negative text. Finally, we find that the use of negative words improves a company’s earnings response coefficient (ERC). Taken together, our results lead us to conclude that text in audit opinions conveys information about “audit caution” instead of corporate performance.


Textual Tone Audit Opinions Audit Caution