Shared Auditors in Mergers and Acquisitions

59 Pages Posted: 20 Apr 2013 Last revised: 3 Feb 2015

Dan S. Dhaliwal

University of Arizona - Department of Accounting

Phillip T. Lamoreaux

Arizona State University

Lubomir P. Litov

University of Oklahoma - Michael F. Price College of Business; University of Pennsylvania - Wharton Financial Institutions Center

Jordan Neyland

The University of Melbourne; Financial Research Network (FIRN)

Multiple version iconThere are 2 versions of this paper

Date Written: August 21, 2014

Abstract

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, and that these results are robust to controls for alternative explanations and for selection bias in the shared-auditor effect.

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

JEL Classification: G34, M41, M49

Suggested Citation

Dhaliwal, Dan S. and Lamoreaux, Phillip T. and Litov, Lubomir P. and Neyland, Jordan, Shared Auditors in Mergers and Acquisitions (August 21, 2014). FIRN Research Paper. Available at SSRN: https://ssrn.com/abstract=2254077 or http://dx.doi.org/10.2139/ssrn.2254077

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 Oklahoma - Michael F. Price College of Business ( email )

307 West Brooks
Norman, OK 73019-4004
United States

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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