Specialized Auditors in Strategic Alliances

53 Pages Posted: 12 Mar 2018

See all articles by Angela K. Gore

Angela K. Gore

George Washington University - School of Business

Yuan Ji

The Hong Kong Polytechnic University

Yanfeng Xue

George Washington University - Department of Accountancy

Date Written: February 2, 2018

Abstract

We investigate the impact on strategic alliance value when auditors have greater knowledge and experience in auditing contractual alliances. Although common and economically significant, contractual alliances often fail due to uncertainty, lack of trust, and poor culture matches between alliance partners. We hypothesize that auditors with more extensive alliance expertise can help partner firms reduce information uncertainty and hold-up problems endemic in alliance relationships, resulting in higher quality alliances. Our measures of auditor expertise capture three aspects of auditor knowledge, including general alliance, alliance type (e.g. technology alliances), and deal-specific (both alliance partners share the same auditor) expertise. Primary findings document that announcement date abnormal returns are higher among alliance partners served by an alliance expert auditor, after controlling for Big N and auditor industry expertise. Effects are more pronounced among alliance partners where uncertainty and trust are more problematic – when bankruptcy risk is greater, boards are not independent, managers are more entrenched, and corporate culture environments are of poor quality. Overall, our evidence suggests that auditors with alliance expertise help firms increase value in strategic alliance arrangements.

Keywords: Alliance, Auditor, Contracting, Corporate Culture

JEL Classification: L14, G34, M14, M19, M41, M49

Suggested Citation

Gore, Angela K. and Ji, Yuan and Xue, Yanfeng, Specialized Auditors in Strategic Alliances (February 2, 2018). Available at SSRN: https://ssrn.com/abstract=3137753 or http://dx.doi.org/10.2139/ssrn.3137753

Angela K. Gore (Contact Author)

George Washington University - School of Business ( email )

2201 G St NW
Washington, DC 20052
United States
(202) 994-6195 (Phone)

Yuan Ji

The Hong Kong Polytechnic University ( email )

Hung Hom
Kowloon, Hong Kong
Hong Kong

Yanfeng Xue

George Washington University - Department of Accountancy ( email )

School of Business and Public Management
Washington, DC 20052
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
67
rank
318,935
Abstract Views
346
PlumX Metrics