Do Investors Care Who Did the Audit? Early Evidence of the Informativeness of Form AP

62 Pages Posted: 14 Aug 2018

See all articles by Marcus Doxey

Marcus Doxey

University of Alabama - Culverhouse School of Accountancy

James Lawson

University of Alabama - Culverhouse School of Accountancy

Thomas J. Lopez

University of Alabama - Culverhouse School of Accountancy

Quinn Thomas Swanquist

University of Alabama - Culverhouse School of Accountancy

Date Written: July 27, 2018

Abstract

In 2017, the PCAOB mandated the disclosure of lead audit partners and other audit participants for U.S. public companies. We investigate whether these disclosures are informative to investors. Our initial tests show no evidence of an incremental market response, measured using abnormal trading volume and number of trades, around the disclosure of partner identity or other auditor participation. We extend our investigation to examine investor responses to partner changes, high levels of outside participation, and participation from auditors outside PCAOB jurisdictions. Even in these subsamples, we find no significant market response. Further, the precision of our estimates indicates that these disclosures had no meaningful economic effect on investor trading behavior. Our findings are robust to alternative specifications and to measuring informativeness using bid-ask spreads. Overall, the evidence suggests that the initial partner and other audit participant disclosures have not significantly impacted capital markets.

Keywords: Audit Partners, Capital Markets, Form AP

JEL Classification: M40, M42, M48

Suggested Citation

Doxey, Marcus M and Lawson, James and Lopez, Thomas J. and Swanquist, Quinn Thomas, Do Investors Care Who Did the Audit? Early Evidence of the Informativeness of Form AP (July 27, 2018). Available at SSRN: https://ssrn.com/abstract=3221383 or http://dx.doi.org/10.2139/ssrn.3221383

Marcus M Doxey (Contact Author)

University of Alabama - Culverhouse School of Accountancy ( email )

Tuscaloosa, AL 35487
United States

James Lawson

University of Alabama - Culverhouse School of Accountancy ( email )

Tuscaloosa, AL 35487
United States

Thomas J. Lopez

University of Alabama - Culverhouse School of Accountancy ( email )

Culverhouse College of Business
Tuscaloosa, AL 35487-0223
United States
205-348-2907 (Phone)

Quinn Thomas Swanquist

University of Alabama - Culverhouse School of Accountancy ( email )

Tuscaloosa, AL 35487
United States

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