Investor Reaction to the Audit Engagement Partner Disclosure Rule

Park, H. (2021), "Investor reaction to the audit engagement partner disclosure rule", Managerial Auditing Journal, Vol. 36 No. 1, pp. 167-190. https://doi.org/10.1108/MAJ-11-2020-2893

38 Pages Posted: 10 Jun 2021

Date Written: March 26, 2021

Abstract

This study aims to examine whether investors perceive the adoption of Public Company Accounting Oversight Board (PCAOB) Rule 3211, which mandates disclosure of the identity of audit engagement partners for the US-listed companies, as providing net benefits to the companies. We identify 33 events leading up to the adoption of the PCAOB rule and examines the market reaction around these events and find positive abnormal market-wide returns in response to events that increase the likelihood of adopting the mandate. These positive returns are relatively stronger among companies with higher audit risk and companies with high-quality auditors. Our results indicate that market participants expect that the overall benefits from the audit engagement partner disclosure rule outweigh the associated costs for average firms and in particular for firms with high audit risk and high-quality auditors.

Keywords: Market reaction, Auditor quality, PCAOB, Audit risk, Form AP, Rule 3211

Suggested Citation

Park, Hyungshin, Investor Reaction to the Audit Engagement Partner Disclosure Rule (March 26, 2021). Park, H. (2021), "Investor reaction to the audit engagement partner disclosure rule", Managerial Auditing Journal, Vol. 36 No. 1, pp. 167-190. https://doi.org/10.1108/MAJ-11-2020-2893, Available at SSRN: https://ssrn.com/abstract=3813332

Hyungshin Park (Contact Author)

Santa Clara University ( email )

500 El Camino Real
Santa Clara, CA 95053
United States

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