Public Audit Oversight and Reporting Credibility: Evidence from the PCAOB Inspection Regime

70 Pages Posted: 8 Sep 2015 Last revised: 9 Oct 2015

See all articles by Brandon Gipper

Brandon Gipper

Stanford University Graduate School of Business

Christian Leuz

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI); Center for Financial Studies (CFS); University of Pennsylvania - Wharton Financial Institutions Center; CESifo Research Network

Mark G. Maffett

University of Chicago - Booth School of Business

Multiple version iconThere are 3 versions of this paper

Date Written: September 2015

Abstract

This paper studies the impact of public audit oversight on financial reporting credibility. We analyze changes in market responses to earnings news after public audit oversight is introduced, exploiting that the regime onset depends on fiscal year-ends, auditors, and the rollout of auditor inspections. We find that investors respond more strongly to earnings news following public audit oversight. Corroborating these findings, we find an increase in volume responses to 10-K filings after the new regime. Our results show that public audit oversight can enhance reporting credibility and that this credibility is priced in capital markets.

Suggested Citation

Gipper, Brandon and Leuz, Christian and Maffett, Mark G., Public Audit Oversight and Reporting Credibility: Evidence from the PCAOB Inspection Regime (September 2015). NBER Working Paper No. w21530. Available at SSRN: https://ssrn.com/abstract=2656933

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Christian Leuz

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Mark G. Maffett

University of Chicago - Booth School of Business ( email )

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