Affiliation:
1. Northwestern University and PCAOB, Center for Economic Analysis
2. National Taiwan University
3. Massachusetts Institute of Technology
Abstract
ABSTRACT
This paper examines whether the identity of the individual audit partners provides informational value to capital market participants beyond the value provided by the identity of the audit firms. Using data from Taiwan, where firms are mandated to disclose the names of the engagement partners, we find a positive association between the partner's quality and the client firm's earnings response coefficient. We also find a positive market reaction when a firm replaces a lower quality partner with a higher quality one. Moreover, we find evidence that firms audited by higher quality partners experience smaller initial public offering (IPO) underpricing and are able to obtain better debt contract terms. Overall, these results suggest that the quality of engagement partners matters to capital market participants.
Publisher
American Accounting Association
Subject
Economics and Econometrics,Finance,Accounting
Reference67 articles.
1. The role of earnings levels in annual earnings-returns studies;Ali;Journal of Accounting Research,1992
2. Auditor industry specialization and earnings quality;Balsam;Auditing: A Journal of Practice & Theory,2003
3. Underpricing of new issues and the choice of auditor as a signal of investment banker reputation;Balvers;The Accounting Review,1988
4. Auditor reputation and the pricing of initial public offerings;Beatty;The Accounting Review,1989
5. Investment banking, reputation, and the underpricing of initial public offerings;Beatty;Journal of Financial Economics,1986
Cited by
177 articles.
订阅此论文施引文献
订阅此论文施引文献，注册后可以免费订阅5篇论文的施引文献，订阅后可以查看论文全部施引文献