Associate Professor Liu Xinming from the Accounting Development Research Center/School of Management of Xiamen University and Dr. Zhu Xiaoqiao from the Accounting Department of School of Management of Xiamen University collaborated on a paper entitled "The voluntary Resignation of Supervisors and Auditor Change", which was published in Accounting Research.

Corporate governance mechanism is a system developed for the principal-agent problem of the company, and it is one of the indispensable restraint systems for the healthy development of the company. In different countries and different institutional backgrounds, corporate governance mechanisms have different performances. In China, the board of supervisors system has left an indelible mark on the development of the company.

Looking back at history, China's board of supervisors system sprouted in Xia, Shang and Western Zhou Dynasties, and it has been traced in the Company Law of the Qing government, the first written company law in China. After that, it was formally written into the first company law of New China in 1994, and it was further improved on the basis of drawing lessons from German and Japanese supervisory board systems. China's regulatory agencies have always attached great importance to the supervisory role of the board of supervisors, and the administrative regulatory agencies have continuously increased the punishment for supervisors who violate the rules to boost their corporate governance role. However, the theoretical and practical circles have not yet reached a consensus on the effectiveness of the board of supervisors system. Moreover, in view of the introduction of the independent director system in China in 2001, the practical circles are still unable to agree on whether the independent director system and the board of supervisors system should be retained at the same time. From the perspective of auditors and investors, this paper examines the effectiveness of the supervisory board system, an important prerequisite for the reform of the supervisory board system, by exploring their reactions when supervisors resign voluntarily.

In order to explore the effectiveness of the board of supervisors system, this paper focuses on the abnormal behavior of supervisors' voluntary resignation, and specifically explores three levels of problems. First, according to the theory of new institutional economics, higher legal risk is an important reason for supervisors to resign voluntarily, which is directly tested in this paper. Secondly, after noticing the voluntary resignation of supervisors, will auditors change to control risks? Thirdly, after the company announced that the supervisor resigned voluntarily, can investors capture the relevant risks and have a significantly negative market reaction?

Based on the data of listed companies in China from 2009 to 2020, this paper empirically finds that the voluntary resignation of supervisors will release incremental risk signals to the outside world, so the possibility of accounting firm change is higher and the market reaction is significantly negative. Moreover, this paper further examines the factors that influence the firm's change, and finds that the resignation behavior with different risk levels presents a differentiated signal function, that is, the more vague reasons for resignation, the resignation of supervisors with stronger supervision effect and the worse supervision effect of successor supervisors will lead to the greater possibility of firm change, while the firm's industry expertise and customer importance will affect the auditor's response. Finally, based on the personal data of supervisors, this paper finds that voluntary resignation of supervisors is one of the ways to deal with legal risks, so its resignation can warn external stakeholders.