PCAOB International Inspections and Merger and Acquisition Outcomes
65 Pages Posted: 20 Apr 2020
Date Written: March 26, 2020
This study examines how PCAOB international inspections of non-U.S. auditors affect international Merger and Acquisition (M&A) outcomes. We find that clients of inspected auditors are more likely to become acquisition targets after the public disclosure of auditor’s inspection report. We also find that deal completion is more likely and deal announcement returns are higher if deals involve targets with auditors for which inspection reports are available. Engagement deficiencies and unremediated quality control deficiencies identified in inspection reports weaken the positive effect of PCAOB oversight on M&A outcomes. Collectively, our results suggest that PCAOB oversight reduces information uncertainty in M&A deals.
Keywords: PCAOB International Inspection, Audit Quality, Merger and Acquisition
JEL Classification: G34; M41, M49
Suggested Citation: Suggested Citation