PCAOB International Inspections and Merger and Acquisition Outcomes

Yongtae KIM*, Lixin Nancy SU, Gaoguang Stephen ZHOU, Xindong Kevin ZHU

*Corresponding author for this work

Research output: Journal PublicationsJournal Article (refereed)

Abstract

This study examines how PCAOB international inspections of non-U.S. auditors affect international Merger and Acquisition (M&A) outcomes. We find that clients of inspected auditors are more likely to become acquisition targets after the public disclosure of auditor’s inspection report. We also find that deal completion is more likely and deal announcement returns are higher if deals involve targets with auditors for which inspection reports are available. Engagement deficiencies and unremediated quality control deficiencies identified in inspection reports weaken the positive effect of PCAOB oversight on M&A outcomes. Collectively, our results suggest that PCAOB oversight reduces information uncertainty in M&A deals.
Original languageEnglish
Article number101318
JournalJournal of Accounting and Economics
DOIs
Publication statusE-pub ahead of print - 3 Apr 2020

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Bibliographical note

We thank Joanna Wu (the editor), an anonymous referee, Inder Khurana, Ke Wang (discussant), and the conference/workshop participants at 2018 European Accounting Association Conference, 2018 MIT Asian Conference in Accounting, and Shanghai University of Finance and Economics for valuable comments. All errors are our own.

Keywords

  • Audit quality
  • Merger and acquisition
  • PCAOB international inspection

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