Abstract

http://ssrn.com/abstract=2254077
 
 

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Shared Auditors in Mergers and Acquisitions


Dan S. Dhaliwal


University of Arizona - Department of Accounting

Phillip T. Lamoreaux


Arizona State University

Lubomir P. Litov


University of Arizona - Department of Finance; University of Pennsylvania - Wharton Financial Institutions Center

Jordan Neyland


The University of Melbourne; Financial Research Network (FIRN)

March 24, 2014


Abstract:     
We examine the effect of shared auditors, defined as audit firms that provide audit services to both a target and acquirer firm prior to an acquisition, on transaction outcomes. Shared auditors are observed in nearly a quarter of all public acquisitions and are associated with significantly lower deal premiums, lower target event returns, higher bidder event returns, and higher deal completion rates. Moreover, targets are more likely to receive a bid from a firm that has the same auditor. These results are more pronounced when targets and acquirers are audited by the same office of the audit firm and are partially mitigated after the adoption of the Sarbanes-Oxley Act. Overall, our results suggest that the bidder benefits from sharing the same auditor with the target and are robust to controlling for alternative explanations and the selection bias in the shared-auditor effects.

Number of Pages in PDF File: 57

Keywords: auditors, shared auditors, mergers and acquisitions, information asymmetry

JEL Classification: G34, M41, M49

working papers series


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Date posted: April 20, 2013 ; Last revised: March 28, 2014

Suggested Citation

Dhaliwal, Dan S. and Lamoreaux, Phillip T. and Litov, Lubomir P. and Neyland, Jordan, Shared Auditors in Mergers and Acquisitions (March 24, 2014). Available at SSRN: http://ssrn.com/abstract=2254077 or http://dx.doi.org/10.2139/ssrn.2254077

Contact Information

Dan S. Dhaliwal (Contact Author)
University of Arizona - Department of Accounting ( email )
McClelland Hall
PO Box 210108
Tucson, AZ 85721
United States
Phillip T. Lamoreaux
Arizona State University ( email )
Tempe, AZ 85287
United States
Lubomir P. Litov
University of Arizona - Department of Finance ( email )
McClelland Hall
P.O. Box 210108
Tucson, AZ 85721-0108
United States
520-621-3794 (Phone)
University of Pennsylvania - Wharton Financial Institutions Center
2306 Steinberg Hall-Dietrich Hall
3620 Locust Walk
Philadelphia, PA 19104
United States

Jordan Neyland
The University of Melbourne ( email )
Faculty of Business and Economics
Parkville, Victoria 3010
Australia
+61 3 9035 3763 (Phone)
Financial Research Network (FIRN)
C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia
HOME PAGE: http://www.firn.org.au

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