The Impact of Audit Quality in Rights Offerings

ISSN:1467-629X Accounting and finance

44 Pages Posted: 17 Feb 2014 Last revised: 12 Nov 2018

See all articles by Balasingham Balachandran

Balasingham Balachandran

La Trobe University - School of Economics and Finance; Financial Research Network (FIRN)

Robert W. Faff

University of Queensland

Lily Nguyen

The University of Queensland - UQ Business School

Premkanth Puwanenthiren

La Trobe University - School of Economics and Finance

Date Written: November 12, 2018

Abstract

Using audit quality as our core focus, we take a fresh look at the tradability and standby status in rights offerings, and the market reaction during the subscription period in the US market. We find that firms with high audit quality are more likely to choose tradable or full standby rights issues. We also find that the subscription period price reaction is positively related to audit quality and negatively related to issue price discount. These results demonstrate an important role played by the choice of auditors in the design of rights offerings, particularly in mitigating the negative price reaction during the subscription period.

Keywords: rights offerings, transferability, standby status, audit quality, audit fee, Big 6 Auditors

JEL Classification: G13, G32, M42

Suggested Citation

Balachandran, Balasingham and Faff, Robert W. and Nguyen, Lily and Puwanenthiren, Premkanth, The Impact of Audit Quality in Rights Offerings (November 12, 2018). ISSN:1467-629X Accounting and finance. Available at SSRN: https://ssrn.com/abstract=2396692 or http://dx.doi.org/10.2139/ssrn.2396692

Balasingham Balachandran (Contact Author)

La Trobe University - School of Economics and Finance ( email )

La Trobe University
Bundoora, Vic, 3086
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Robert W. Faff

University of Queensland ( email )

St Lucia
Brisbane, Queensland 4072
Australia

Lily Nguyen

The University of Queensland - UQ Business School ( email )

St Lucia
Brisbane, Queensland 4072
Australia

Premkanth Puwanenthiren

La Trobe University - School of Economics and Finance ( email )

Bundoora
Melbourne, 3086
Australia

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