Auditor quality, corporate risk, and the valuation of new issues
Review of Quantitative Finance and Accounting
auditor quality, new issues, risk, valuation
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.
Copyright © 1995 Kluwer Academic Publishers, Boston
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Firth, M., & Smith, A. (1995). Auditor quality, corporate risk, and the valuation of new issues. Review of Quantitative Finance and Accounting, 5(3), 241-251. doi: 10.1007/BF01074840