Acquirers' abnormal returns and the non-Big 4 auditor clientele effect

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85 Scopus citations


I analyze the effect of auditor choice on acquirers' values around merger announcements and the factors affecting the interaction between auditor size and the market reaction to merger announcements. I find that acquirers audited by non-Big 4 accounting firms outperform those audited by Big 4 firms. This effect is more pronounced when the targets are privately held and when the likelihood of the auditors playing a prominent advisory role increases. While the largest auditing firms are usually assumed to offer superior services, the study suggests that smaller firms have a comparative advantage in assisting their clients in merger transactions.

Original languageEnglish (US)
Pages (from-to)75-99
Number of pages25
JournalJournal of Accounting and Economics
Issue number1-3
StatePublished - Dec 2005

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics


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