Common Auditors and Cross-Country M&A Transactions

41 Pages Posted: 20 May 2016 Last revised: 8 Apr 2017

See all articles by Justin Chircop

Justin Chircop

Lancaster University Management School

Sofia Johan

Florida Atlantic University - Finance; Tilburg Law and Economics Center (TILEC)

Monika Tarsalewska

University of Exeter Business School

Date Written: April 1, 2017

Abstract

Using a comprehensive sample of cross-country mergers and acquisitions for the period 2000 to 2014 we examine the effect of common auditors on the efficiency of cross-country M&A transactions. We predict that the use of common auditors reduces uncertainty, resulting in higher M&A efficiency. We find that this common-auditor effect results in a positive market reaction to the M&A announcement, lower premium and greater increase in return on assets following the M&A transaction. Further, we find that these effects are more pronounced the greater the M&A transaction uncertainty and when the accounting standards of the transacting parties differ.

Keywords: Auditors; Information transfer; M&As

JEL Classification: D82; D83; M41

Suggested Citation

Chircop, Justin and Johan, Sofia A. and Tarsalewska, Monika, Common Auditors and Cross-Country M&A Transactions (April 1, 2017). Journal of International Financial Markets, Institutions and Money, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2781389 or http://dx.doi.org/10.2139/ssrn.2781389

Justin Chircop

Lancaster University Management School ( email )

Lancaster University
Lancaster, Lancashire LA1 4YX
United Kingdom

Sofia A. Johan

Florida Atlantic University - Finance ( email )

777 Glades Rd
Boca Raton, FL 33431
United States

Tilburg Law and Economics Center (TILEC) ( email )

Warandelaan 2
Tilburg, 5000 LE
Netherlands

Monika Tarsalewska (Contact Author)

University of Exeter Business School ( email )

XFI building, Streatham Campus
Rennes Drive
Exeter, Devon EX4 4ST
United Kingdom

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