Public Audit Oversight and Reporting Credibility: Evidence from the PCAOB Audit Inspection Regime
The Review of Financial Studies, Forthcoming
Posted: 2 Nov 2019
There are 3 versions of this paper
Public Oversight and Reporting Credibility: Evidence from the PCAOB Audit Inspection Regime
Public Audit Oversight and Reporting Credibility: Evidence from the PCAOB Inspection Regime
Date Written: October 23, 2019
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 roll-out 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.
Keywords: Regulation, Enforcement, Public Oversight, Auditing, Earnings Response Coefficients
JEL Classification: G14, G18, G38, K22, M41, M42, M48
Suggested Citation: Suggested Citation
Brandon Gipper
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Christian Leuz
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