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Shared Auditors in Mergers and Acquisitions

Author

Listed:
  • Dhaliwal, Dan S.

    (University of AZ)

  • Lamoreaux, Phillip T.

    (University of AZ)

  • Litov, Lubomir P.

    (University of AZ and University of PA)

  • Neyland, Jordan B.

    (University of Melbourne and Financial Research Network)

Abstract

We examine the effect of shared auditors, defined as audit firms that provide audit services to both target and acquirer prior to an acquisition, on transaction outcomes. We find that shared auditors are frequently observed-in a quarter of all public acquisitions-and are associated with significantly lower deal premiums, lower target event returns, higher acquirer event returns, and higher deal completion rates. Moreover, targets are likelier to receive a bid from a firm that has the same auditor. These results are more pronounced when targets and acquirers are audited by the same office of the audit firm and are mitigated to an extent after the adoption of the Sarbanes-Oxley Act. Overall, our results suggest that the bidder benefits from sharing the same auditor with the target, in part because of the lower costs to learn about it.

Suggested Citation

  • Dhaliwal, Dan S. & Lamoreaux, Phillip T. & Litov, Lubomir P. & Neyland, Jordan B., 2013. "Shared Auditors in Mergers and Acquisitions," Working Papers 13-14, University of Pennsylvania, Wharton School, Weiss Center.
    • Handle: RePEc:ecl:upafin:13-14
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    References listed on IDEAS

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    More about this item

    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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