Do Shared Auditors Facilitate Information Transfer between Clients? Evidence from Patent Citations

58 Pages Posted: 6 May 2022

See all articles by Xuan Tian

Xuan Tian

Tsinghua University - PBC School of Finance

Jiawen Yan

Cornell University - Samuel Curtis Johnson Graduate School of Management

Luo Zuo

Cornell University - Samuel Curtis Johnson Graduate School of Management

Date Written: May 2, 2022

Abstract

This paper explores auditors’ information intermediary role by examining auditor-facilitated information transfer between clients. We find that a company is more likely to cite another company’s patents when they are audited by the same audit firm. This effect is stronger when the two companies are audited by the same practice office of an audit firm, exhibit intensive innovation activities, and are peers in the product market. Furthermore, the effect of shared auditors on patent citations is more pronounced for the patents that are less familiar to their clients, and the effect is mitigated for the patents that are more difficult for their clients to utilize in their own innovation. In addition, auditor-facilitated information transfer leads to more intensive innovation activities. Overall, our results present evidence that shared auditors facilitate the transfer of public information between their clients.

Keywords: Shared Auditor, Information Transfer, Patent Citation, Corporate Innovation

JEL Classification: M42, O30

Suggested Citation

Tian, Xuan and Yan, Jiawen and Zuo, Luo, Do Shared Auditors Facilitate Information Transfer between Clients? Evidence from Patent Citations (May 2, 2022). Available at SSRN: https://ssrn.com/abstract=4099144 or http://dx.doi.org/10.2139/ssrn.4099144

Xuan Tian

Tsinghua University - PBC School of Finance ( email )

No. 43, Chengfu Road
Haidian District
Beijing 100083
China
+86-10-62794103 (Phone)

HOME PAGE: http://xuantian.info/

Jiawen Yan

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

Ithaca, NY 14853
United States

Luo Zuo (Contact Author)

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

349 Sage Hall
Ithaca, NY 14853
United States
607-255-4002 (Phone)

HOME PAGE: http://www.johnson.cornell.edu/faculty-research/faculty/lz352/

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