Common Auditors in M&A Transactions
By Ye Cai, Yongtae Kim, Jong Chool Park, Halbert White. 2016
169 citations recorded by the source corpus.
We examine merger and acquisition (M&A) transactions in which the acquirer and the target share a common auditor. We predict that a common auditor can help merging firms reduce uncertainty throughout the acquisition process, which allows managers to more efficiently allocate their capital, resulting in higher quality M&As. Consistent with our prediction, we find that deals with common auditors have higher acquisition announcement returns than do non-common-auditor deals. Further, we find that the common-auditor effect is more pronounced for deals with greater pre-acquisition uncertainty and deals involving acquirers and targets that are audited by the same local office of the common auditor. We also find that there is an increased probability of an M&A for firms with a common auditor. Collectively, our evidence suggests that common auditors act as information intermediaries for merging firms, resulting in higher quality acquisitions.
Subfields: Accounting, Finance
View Paper: https://www.semanticscholar.org/paper/4100bc7aaeb3265906b277403074596c00ede0e1
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In Accounting
- Nemit Shroff
- Rodrigo S. Verdi
- S. Roychowdhury
- Martin Walker
- Beatriz García Osma
- Juan Manuel García Lara
- L. Doukakis
- Daniel A. Cohen
In Finance
- Rodrigo S. Verdi
- Nemit Shroff
- S. Roychowdhury
- L. Doukakis
- Daniel A. Cohen
- Martin Walker
- Byungcherl Charlie Sohn
- Beatriz García Osma
Citations in the corpus
- Institutional Cross-Ownership and Corporate Strategy: The Case of Mergers and Acquisitions (2018, unknown): “Similarly to Cai et al. (2016), we define the earnings misreporting dummy to be equal to one if the beginning date of the misstatement period is within a two-year window before the deal completion date and zero otherwise.15 Table 10 reports the coefficient estimates from the probit regressions of…”
- The effects of financial reporting and disclosure on corporate investment: A review (2019, background): “For example, Cai et al. (2016) find that M&A transactions in which the acquirer and target share a common auditor are more value enhancing (proxied by M&A announcement returns) than those without common auditors.”