Do Investors Care Who Did the Audit? Early Evidence of the Informativeness of Form AP
62 Pages Posted: 14 Aug 2018
Date Written: July 27, 2018
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: Suggested Citation