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PCAOB international inspections and Merger and Acquisition outcomes

Author

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  • Kim, Yongtae
  • (Nancy) Su, Lixin
  • (Stephen) Zhou, Gaoguang
  • (Kevin) Zhu, Xindong

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.

Suggested Citation

  • Kim, Yongtae & (Nancy) Su, Lixin & (Stephen) Zhou, Gaoguang & (Kevin) Zhu, Xindong, 2020. "PCAOB international inspections and Merger and Acquisition outcomes," Journal of Accounting and Economics, Elsevier, vol. 70(1).
    • Handle: RePEc:eee:jaecon:v:70:y:2020:i:1:s0165410120300203
    DOI: 10.1016/j.jacceco.2020.101318
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    1. Hossain, Mohammed Sawkat, 2021. "Merger & Acquisitions (M&As) as an important strategic vehicle in business: Thematic areas, research avenues & possible suggestions," Journal of Economics and Business, Elsevier, vol. 116(C).
    2. Gu, Tracy & Jiang, Yiqi & Simunic, Dan, 2023. "The value of the PCAOB’s international audit oversight on U.S. listed foreign companies: Evidence from an initial enforcement breakdown," Journal of Contemporary Accounting and Economics, Elsevier, vol. 19(1).

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    More about this item

    Keywords

    PCAOB international inspection; Audit quality; Merger and acquisition;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M49 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Other

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