TY - JOUR
T1 - Shared auditors in mergers and acquisitions
AU - Dhaliwal, Dan S.
AU - Lamoreaux, Phillip
AU - Litov, Lubomir P.
AU - Neyland, Jordan B.
N1 - Publisher Copyright:
© 2015 Elsevier B.V.
PY - 2016/2/1
Y1 - 2016/2/1
N2 - We examine the impact of shared auditors, defined as audit firms that provide audit services to a target and its acquirer firm prior to an acquisition, on transaction outcomes. We find shared auditors are observed in nearly a quarter of all public acquisitions and targets are more likely to receive a bid from a firm that has the same auditor. Moreover, these shared auditor deals are associated with significantly lower deal premiums, lower target event returns, higher bidder event returns, and higher deal completion rates. These results are driven by bids in which targets and acquirers share the same practice office of an audit firm and in which the target is small. Overall, our evidence suggests that bidders benefit from sharing an auditor with the target. Our results are robust to controls for alternative explanations and for selection bias in the shared-auditor effect.
AB - We examine the impact of shared auditors, defined as audit firms that provide audit services to a target and its acquirer firm prior to an acquisition, on transaction outcomes. We find shared auditors are observed in nearly a quarter of all public acquisitions and targets are more likely to receive a bid from a firm that has the same auditor. Moreover, these shared auditor deals are associated with significantly lower deal premiums, lower target event returns, higher bidder event returns, and higher deal completion rates. These results are driven by bids in which targets and acquirers share the same practice office of an audit firm and in which the target is small. Overall, our evidence suggests that bidders benefit from sharing an auditor with the target. Our results are robust to controls for alternative explanations and for selection bias in the shared-auditor effect.
KW - Auditors
KW - Information asymmetry
KW - Mergers and acquisitions
KW - Shared auditors
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U2 - 10.1016/j.jacceco.2015.01.005
DO - 10.1016/j.jacceco.2015.01.005
M3 - Article
AN - SCOPUS:84960258013
SN - 0165-4101
VL - 61
SP - 49
EP - 76
JO - Journal of Accounting and Economics
JF - Journal of Accounting and Economics
IS - 1
ER -