Auditor quality, corporate risk, and the valuation of new issues

Michael Arthur FIRTH, Andrew SMITH

Research output: Journal PublicationsJournal Article (refereed)

6 Citations (Scopus)

Abstract

This paper tests two hypotheses derived from the Data et al. (1991) theoretical model of auditor choice by companies newly listing on the stock exchange. The results offer support to their predictions of the demand for auditor quality. In particular, higher-risk companies are associated with the selection of a high-quality auditor, as proxied by a Big Eight firm of accountants. Additionally, companies who employed Big Eight firms had higher market valuations of their stock at the time of listing.
Original languageEnglish
Pages (from-to)241-251
Number of pages11
JournalReview of Quantitative Finance and Accounting
Volume5
Issue number3
DOIs
Publication statusPublished - 1 Jan 1995

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Keywords

  • auditor quality
  • new issues
  • risk
  • valuation

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