Auditor's Reputation and Equity Offerings: The Case of Arthur Andersen

15 Pages Posted: 13 Dec 2005

See all articles by Stephanie Yates Rauterkus

Stephanie Yates Rauterkus

Rensselaer Polytechnic Institute (RPI) - Department of Finance and Accounting

Kyojik Song

Sungkyunkwan University

Abstract

The certifying and monitoring role of auditors is valuable to clients. By examining the impact of Arthur Andersen's worsening reputation on its clients, we find a 200 basis point more negative reaction to seasoned equity offering (SEO) announcements for firms audited by Andersen. The median firm in our sample loses $31.4 million more than a non-Andersen client. We do not find any unusual underpricing for these SEOs, which suggests that any accounting concerns about the issuers are resolved before the issue dates.

JEL Classification: M49, G24, G12

Suggested Citation

Rauterkus, Stephanie Yates and Song, Kyojik, Auditor's Reputation and Equity Offerings: The Case of Arthur Andersen. Financial Management, Vol. 34, No. 4, Winter 2005, Available at SSRN: https://ssrn.com/abstract=869636

Stephanie Yates Rauterkus (Contact Author)

Rensselaer Polytechnic Institute (RPI) - Department of Finance and Accounting ( email )

Pittsburg Building 2000
110, 8th street
Troy, NY 12180
United States

Kyojik Song

Sungkyunkwan University ( email )

53 Myeongnyun-dong 3-ga Jongno-ju
Guro-gu
Seoul, 110-745
Korea, Republic of (South Korea)
82-2-760-0497 (Phone)

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