The Effect of Industry–Specialist Auditors on SEO Underpricing Before and After the Global Financial Crisis

50 Pages Posted: 1 Mar 2015 Last revised: 30 Aug 2017

See all articles by Soo Young Kwon

Soo Young Kwon

Korea University

Jongwon Park

Monash Business School

Jaeyoon Yu

Erasmus University

Date Written: March 16, 2017

Abstract

This study examines whether auditors’ industry expertise is negatively associated with underpricing of seasoned equity offerings (SEO) and whether the association between auditors’ industry expertise and SEO underpricing changes around the global financial crisis (GFC). Using a sample of 2,028 SEO observations from 2001 to 2013, we document that in the pre-GFC period, auditors’ industry expertise is negatively associated with SEO underpricing, but not during the post-GFC period. Industry specialist auditors are also associated with higher earnings response coefficients in the pre-GFC period, but not in the post-GFC period. These results suggest that the GFC reduced investor confidence in industry specialist auditors in the capital markets.

Keywords: SEO underpricing, industry specialist auditor, global financial crisis

JEL Classification: G01, G14, G32, M42

Suggested Citation

Kwon, Soo Young and Park, Jongwon and Yu, Jaeyoon, The Effect of Industry–Specialist Auditors on SEO Underpricing Before and After the Global Financial Crisis (March 16, 2017). Auditing: A Journal of Practice & Theory, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2571566 or http://dx.doi.org/10.2139/ssrn.2571566

Soo Young Kwon (Contact Author)

Korea University ( email )

#613 LG-POSCO Hall
145 Anamro, Seongbuk-Gu
Seoul, 136-701
Korea, Republic of (South Korea)
82232901937 (Phone)

Jongwon Park

Monash Business School ( email )

H3.43, Building H, Level 3
Monash University Caulfiled
Melbourne, VIC 3145
Australia
399032068 (Phone)

Jaeyoon Yu

Erasmus University ( email )

Netherlands

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