Shared Auditors in Mergers and Acquisitions

Dhaliwal, Dan S.; Lamoreaux, Phillip T.; Litov, L.; Neyland, Jordan

doi:10.2139/ssrn.2254077

Cited by 38 publications

(89 citation statements)

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“…Finally, our study complements concurrent work by Dhaliwal et al (2015), who also examine the role of common auditors in M&A transactions. Our study delves into the mechanisms through which common auditors affect M&A outcomes.…”

Section: Introductionmentioning

confidence: 67%

“…Third, we contribute to the large literature examining the effect of sharing an agent on economic outcomes by providing evidence on the impact of sharing an auditor on M&A outcomes. Finally, we complement concurrent work by Dhaliwal et al (2015), who also examine the role of common auditors in M&A outcomes. While we show that common auditors are associated with higher quality M&As, Dhaliwal et al (2015) find that the benefits accrue to the acquirers at the target's expense.…”

Section: Resultsmentioning

confidence: 88%

“…Using differences in year-specific total accruals (Francis et al, 2014) and the covariance of earnings across time (Barth et al, 2012;De Franco et al, 2011;3 That is, ($8.99 billion + $870 million) × 1.064% = $104.9 million. For comparison, consider that Dhaliwal et al (2015) find a 0.7% higher return for acquirers in common-auditor M&As. While our return of 1.06% is a little higher, this might be somewhat expected given our sample involves acquisitions where the acquirer ends up with 100% ownership control after the acquisition instead of 50% (or more) control, as in acquisitions in the Dhaliwal et al (2015) sample.…”

Section: Introductionmentioning

confidence: 99%

“…For comparison, consider that Dhaliwal et al (2015) find a 0.7% higher return for acquirers in common-auditor M&As. While our return of 1.06% is a little higher, this might be somewhat expected given our sample involves acquisitions where the acquirer ends up with 100% ownership control after the acquisition instead of 50% (or more) control, as in acquisitions in the Dhaliwal et al (2015) sample. Lang et al, 2010) as proxies for comparability, we find that acquirers and targets with common auditors have more comparable financial statements than do those with different auditors.…”

Section: Introductionmentioning

confidence: 99%

“…We find evidence consistent with the common auditor resolving information uncertainty between the parties in the transaction. Dhaliwal et al (2015) The rest of this paper is organized as follows. In Section 2, we discuss the M&A process as well as how a common auditor can help reduce uncertainties in that process.…”

Section: Introductionmentioning

confidence: 99%

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Common auditors in M&A transactions

Cai

Kim

Park

et al. 2016

Journal of Accounting and Economics

152

103

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We examine merger and acquisition (M&A) transactions in which the acquirer and the target share a common auditor. We predict that a common auditor can help merging firms reduce uncertainty throughout the acquisition process, which allows managers to more efficiently allocate their capital, resulting in higher quality M&As. Consistent with our prediction, we find that deals with common auditors have higher acquisition announcement returns than do non-common-auditor deals. Further, we find that the common-auditor effect is more pronounced for deals with greater pre-acquisition uncertainty and deals involving acquirers and targets that are audited by the same local office of the common auditor. We also find that there is an increased probability of an M&A for firms with a common auditor. Collectively, our evidence suggests that common auditors act as information intermediaries for merging firms, resulting in higher quality acquisitions. Highlights• We examine merger and acquisition (M&A) transactions in which the acquirer and the target share a common auditor. • A common auditor helps merging firms reduce uncertainty, resulting in higher quality M&As. • Deals with common auditors have higher acquisition announcement returns than do non-common-auditor deals. • The common-auditor effect is more pronounced for deals with greater preacquisition uncertainty. • The common-auditor effect is more pronounced for deals involving the same local office of the common auditor. JEL Classification G34; M41; M49We thank Michelle Hanlon (the editor), an anonymous referee,

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Section: Introductionmentioning

confidence: 67%

Section: Resultsmentioning

confidence: 88%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 3 more Smart Citations

Common auditors in M&A transactions

Cai

Kim

Park

et al. 2016

Journal of Accounting and Economics

152

103

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Time‐to‐completion for mergers and acquisitions in the food and agribusiness industry

Adelaja

Mukhopadhyay

2022

Agribusiness

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Longer time-to-completion (TTC) increases transaction costs, delays deal benefits, and reduces the probability of meeting transaction objectives in mergers and acquisitions (M&A) transactions. This paper conceptualizes the determinants of TTC and estimates their effects in the food and agribusiness industry (FABI) due to the critical importance of TTC to M&A success and the dearth of existing studies on the industry. We confirm that longer TTC increases the likelihood of deal failure. We also find the following: company-specific factors such as acquirer solvency and leverage reduce TTC; deal complexity factors such as deals involving payment in cash or hard currency conclude faster; deals involving both acquirers and targets from the same country or industry take longer; using legal or financial advisers lengthens TTC; limited transparency or greater risk involved in a deal do not delay financing; deals consumed during a recession take longer; deal size and acquirer history of repeated M&A activities neither accelerate nor delay TTC. Considering the limited existing information on the contributions of various factors to timely deal completion or delays in FABI, our findings are useful in predicting M&A deal duration, costs, and potential for success.

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Real effects of auditor conservatism

Chy

Hope

2021

Rev Account Stud

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We examine the effect of auditor conservatism on corporate innovation. We hypothesize that, because conservative auditors constrain income-increasing accounting discretion, managers may sacrifice long-term investments in innovation to boost current earnings and meet short-term performance targets. Exploiting state-level auditor legal liability shocks as a means of identification, we find evidence consistent with this hypothesis. Cross-sectional analyses reveal that the negative effect of increased auditor conservatism on corporate innovation is more pronounced when the client firms are under greater equity-and debt-market pressures, when the client firms are exposed to greater litigation risk, and when the client firms are audited by large auditors. Our study highlights how auditors, as external monitors, can affect not only the financial reporting quality of their clients but may also induce alterations in their real operations.

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Shared Auditors in Mergers and Acquisitions

Cited by 38 publications

References 0 publications

Common auditors in M&A transactions

Common auditors in M&A transactions

Time‐to‐completion for mergers and acquisitions in the food and agribusiness industry

Real effects of auditor conservatism

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