shared auditors in mergers and acquisitions.docx

1、文库 htm:/手机文库 Shared auditors in mergers and acquisitionsShared auditors in mergers and acquisitions$Dan S. Dhaliwala, b, n, Phillip T. Lamoreauxc, Lubomir P. Litovd, Jordan B. Neylande, faUniversity of Arizona, United StatesbKorea University Business School, KoreacArizona State University, United St

2、atesdUniversity of Oklahoma, United StateseUniversity of Melbourne, AustraliafFinancial Research Network (FIRN), Australian rticleinf o Article history: Received 19 April 2013Received in revised form22 January 2015Accepted 26 January 2015JEL classifications:G34M41M49Keywords:AuditorsShared auditorsM

3、ergers and acquisitionslnformation asymmetrya b s t r a c tWe examine the impact of shared auditors, defined as audit firms that provide auditservices to a target and its acquirer firm prior to an acquisition, on transaction outcomes. We find shared auditors are observed in nearly a quarter of all p

4、ublic acquisitions andtargets are more likely to receive a bid from a firm that has the same auditor. Moreover, these shared auditor deals are associated with significantly lower deal premiums, lowertarget event returns, higher bidder event returns, and higher deal completion rates. Theseresults are

5、 driven by bids in which targets and acquirers share the same practice office ofan audit firm and in which the target is small. Overall, our evidence suggests that biddersbenefit from sharing an auditor with the target. Our results are robust to controls foralternative explanations and for selection

6、 bias in the shared-auditor effect. & 2015 Elsevier B. V. All rights reserved. 1. IntroductionWe examine acquisition outcomes when the same auditor audits the financial statements of both a bidder and a targetfirm prior to an acquisition. We hypothesize that shared auditors facilitate the flow o

7、f information between bidders andtargets, and that the benefits of such mitigated information asymmetry accrue primarily to the acquiring firm. External auditors have unique access to senior executives, participate in audit committee meetings, and have access toboard meeting minutes and general info

8、rmation about a firm in the conduct of their audits. This access to senior executivescombined with information gathered during an audit provides auditors with an opportunity to discuss strategic initiativeswith their clients including, among others, the acquisition or disposition of assets. Communic

9、ation about such initiativesmay be in the form of soft talk . Because auditors contract with a variety of companies, auditors have the potential toContents lists available at ScienceDirect journal homepage: www. elsevier. com/locate/jaejournal of Accounting and Economicshttp:/dx. doi. org/10. 1016/j

10、. jacceco. 2015. 01. 0050165-4101/& 2015 Elsevier B. V. All rights reserved. thank Anup Agrawal, Gennaro Bernile, Robert Bruner, Matt Ege, D. J. Fairhurst, Kathleen Kahle, Hayden Kane, Sandy Klasa, Chris Lamoureux, Hennock Louis, ?yvind Norli, Matt Serfling, Richard Sias, Jared Stanfield, Mark T

11、rombley, and workshop participants at the University of Melbourne forhelpful thoughts and comments. We are especially thankful to John Core (the Editor) and Mark DeFond (the Reviewer) for their insightful comments thathelped us greatly improve the paper. Lastly, we thank Mike Mowchan for his researc

12、h assistance, and our respective universities for research funding. nCorresponding author. Tel.: tl 520 621 2146. E-mail addresses: dhaliwalemail. arizona. edu (D. S. Dhaliwal), Phillip. Lamoreauxasu. edu (P.T. Lamoreaux),文库 手机文库 http :/文库 htm:/手机文库 lubomir. p. litov-lou. edu (L. P. Litov), jordan.

13、neylandunimelb. edu. au (J. B. Neyland). Journal of Accounting and Economics () - Please cite this article as: Dhaliwal, D.S., et al., Shared auditors in mergers and acquisitions. Journal of Accounting andEconomics (2015), http:/dx. doi. org/10. 1016/j. jacceco. 2015.01.005ibecome information interm

14、ediaries between prospective targets and acquirers, whether intentional or otherwise. As sharedauditors are incentivized to align with the interests of larger clients, we anticipate a potential bias in favor of acquisitiveclients over target clients. Hence, bidders that share an audit firm with a po

15、tential target could have an informationadvantage relative to others in the process of bidding, and we anticipate that this advantage will manifest itself in anincreased likelihood of submitting a bid for a target. The impact of shared auditors likely extends beyond the point of bidding and target s

16、election. If shared-auditor biddershave an informational advantage relative to competing bidders, bidders with shared auditors can leverage this advantageinto a better bargaining position with the target. As other bidders have less information, they have less incentive to bid, thusreducing bid competition. With lower bid competition, an acquirer with a s