PCAOB International Inspections and Merger and Acquisition Outcomes

Yongtae KIM; Lixin Nancy SU; Gaoguang Stephen ZHOU; Xindong Kevin ZHU

doi:10.1016/j.jacceco.2020.101318

PCAOB International Inspections and Merger and Acquisition Outcomes

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

^*Corresponding author for this work

Lingnan University

Research output: Journal Publications › Journal Article (refereed) › peer-review

16 Citations (Scopus)

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 language	English
Article number	101318
Journal	Journal of Accounting and Economics
Volume	70
Issue number	1
Early online date	3 Apr 2020
DOIs	https://doi.org/10.1016/j.jacceco.2020.101318
Publication status	Published - Aug 2020

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

Access to Document

10.1016/j.jacceco.2020.101318

Cite this

@article{e20d01c66b5e4cd4b777f96d366af773,

title = "PCAOB International Inspections and Merger and Acquisition Outcomes",

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{\textquoteright}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.",

keywords = "Audit quality, Merger and acquisition, PCAOB international inspection",

author = "Yongtae KIM and SU, {Lixin Nancy} and ZHOU, {Gaoguang Stephen} and ZHU, {Xindong Kevin}",

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.",

year = "2020",

month = aug,

doi = "10.1016/j.jacceco.2020.101318",

language = "English",

volume = "70",

journal = "Journal of Accounting and Economics",

issn = "0165-4101",

publisher = "Elsevier B.V.",

number = "1",

}

TY - JOUR

T1 - PCAOB International Inspections and Merger and Acquisition Outcomes

AU - KIM, Yongtae

AU - SU, Lixin Nancy

AU - ZHOU, Gaoguang Stephen

AU - ZHU, Xindong Kevin

N1 - 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.

PY - 2020/8

Y1 - 2020/8

N2 - 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.

AB - 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.

KW - Audit quality

KW - Merger and acquisition

KW - PCAOB international inspection

UR - http://www.scopus.com/inward/record.url?scp=85083676025&partnerID=8YFLogxK

U2 - 10.1016/j.jacceco.2020.101318

DO - 10.1016/j.jacceco.2020.101318

M3 - Journal Article (refereed)

SN - 0165-4101

VL - 70

JO - Journal of Accounting and Economics

JF - Journal of Accounting and Economics

IS - 1

M1 - 101318

ER -

PCAOB International Inspections and Merger and Acquisition Outcomes

Abstract

Bibliographical note

Keywords

Access to Document

Other files and links

PCAOB International Inspections and Merger and Acquisition outcomes

Cite this