Advanced Search
MyIDEAS: Login

Do Expert Informational Intermediaries Add Value? Evidence from Auditors in Microcap Initial Public Offerings


Author Info

  • Joseph Weber
  • Michael Willenborg
Registered author(s):


    Do expert informational intermediaries add value? We address this question by examining the informativeness of the audit report contained in the prospectus associated with a firm's initial public offering (IPO). At the time of the IPO, there is a relative lack of information to facilitate the establishment of equity values, suggesting that the information provided by outside "experts" (e.g., auditors, underwriters) is particularly important. In this article we study small, non-venture-backed IPOs, a segment of the market with the poorest long-run performance and where the prestigious audit firm is often the sole (if any) expert present. We find that the pre-IPO opinions of larger auditors are more predictive of post-IPO negative stock delistings. Of particular note, the opinions of the national-tiered firms are comparably predictive to those of the Big 6, though this finding emerges only after we consider the selectivity-based differences in the clients that hire these national firms. Our findings also indicate that, for larger auditors the presence of a pre-IPO going-concern opinion is more strongly associated with first-year stock returns and that larger auditors are more likely to give such opinions to their distressed clients. Overall, we address a deficiency in the literature relating to "the paucity of evidence on the value of auditor opinions to investors" (Healy and Palepu [ 2001 p. 415]). Copyright University of Chicago on behalf of the Institute of Professional Accounting, 2003.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL:
    File Function: link to full text
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Bibliographic Info

    Article provided by Wiley Blackwell in its journal Journal of Accounting Research.

    Volume (Year): 41 (2003)
    Issue (Month): 4 (09)
    Pages: 681-720

    as in new window
    Handle: RePEc:bla:joares:v:41:y:2003:i:4:p:681-720

    Contact details of provider:
    Web page:

    Order Information:

    Related research



    No references listed on IDEAS
    You can help add them by filling out this form.


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as in new window

    Cited by:
    1. C├ęcile Carpentier & Jean-Marc Suret, 2009. "The Survival and Success of Canadian Penny Stock IPOs," CIRANO Working Papers 2007s-28, CIRANO.
    2. Larcker, David F. & Rusticus, Tjomme O., 2010. "On the use of instrumental variables in accounting research," Journal of Accounting and Economics, Elsevier, vol. 49(3), pages 186-205, April.
    3. Kaplan, Steven E. & Williams, David D., 2012. "The changing relationship between audit firm size and going concern reporting," Accounting, Organizations and Society, Elsevier, vol. 37(5), pages 322-341.
    4. Chang, Xin & Dasgupta, Sudipto & Hilary, Gilles, 2005. "The Effect of Auditor Choice on Financing Decisions," CEI Working Paper Series 2005-10, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.


    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.


    Access and download statistics


    When requesting a correction, please mention this item's handle: RePEc:bla:joares:v:41:y:2003:i:4:p:681-720. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.