Auditor changes following big eight mergers with non-big eight audit firms

Paul Healy; Thomas Lys

doi:10.1016/0278-4254(86)90022-0

Auditor changes following big eight mergers with non-big eight audit firms

Paul Healy, Thomas Lys

Accounting Information and Management

Research output: Contribution to journal › Article › peer-review

51 Scopus citations

Abstract

This paper examines the reaction of clients of "non-Big Eight" audit firms to mergers of their auditors with "Big Eight" firms. We postulate that a non-Big Eight audit firm's clients will retain a Big Eight acquirer following a merger if they benefit from the Big Eight firm's specialized services and/or reputation. Clients that do not have these economic incentives to retain the Big Eight firm are more likely to change to another non-Big Eight audit firm following the merger. Empirical tests of the characteristics of clients that remain with a Big Eight acquirer or change to another smaller auditor following an audit merger generally support our hypotheses.

Original language	English (US)
Pages (from-to)	251-265
Number of pages	15
Journal	Journal of Accounting and Public Policy
Volume	5
Issue number	4
DOIs	https://doi.org/10.1016/0278-4254(86)90022-0
State	Published - 1986

Funding

Financial support was provided in part by the Ernst & Whinney Foundation and by the Accounting Research Center, J. L. Kellogg Graduate School of Management, Northwestern University. We wish to thank Andrew Christie, Bruce Johnson, Eric Noreen, Ross Watts, Jerold Zimmerman, and two anonymous referees for their helpful comments on previous drafts. Research work was performed by Ashok Natarajan.

ASJC Scopus subject areas

Accounting
Sociology and Political Science

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10.1016/0278-4254(86)90022-0

Cite this

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title = "Auditor changes following big eight mergers with non-big eight audit firms",

abstract = "This paper examines the reaction of clients of {"}non-Big Eight{"} audit firms to mergers of their auditors with {"}Big Eight{"} firms. We postulate that a non-Big Eight audit firm's clients will retain a Big Eight acquirer following a merger if they benefit from the Big Eight firm's specialized services and/or reputation. Clients that do not have these economic incentives to retain the Big Eight firm are more likely to change to another non-Big Eight audit firm following the merger. Empirical tests of the characteristics of clients that remain with a Big Eight acquirer or change to another smaller auditor following an audit merger generally support our hypotheses.",

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AU - Lys, Thomas

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N2 - This paper examines the reaction of clients of "non-Big Eight" audit firms to mergers of their auditors with "Big Eight" firms. We postulate that a non-Big Eight audit firm's clients will retain a Big Eight acquirer following a merger if they benefit from the Big Eight firm's specialized services and/or reputation. Clients that do not have these economic incentives to retain the Big Eight firm are more likely to change to another non-Big Eight audit firm following the merger. Empirical tests of the characteristics of clients that remain with a Big Eight acquirer or change to another smaller auditor following an audit merger generally support our hypotheses.

AB - This paper examines the reaction of clients of "non-Big Eight" audit firms to mergers of their auditors with "Big Eight" firms. We postulate that a non-Big Eight audit firm's clients will retain a Big Eight acquirer following a merger if they benefit from the Big Eight firm's specialized services and/or reputation. Clients that do not have these economic incentives to retain the Big Eight firm are more likely to change to another non-Big Eight audit firm following the merger. Empirical tests of the characteristics of clients that remain with a Big Eight acquirer or change to another smaller auditor following an audit merger generally support our hypotheses.

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Auditor changes following big eight mergers with non-big eight audit firms

Abstract

Funding

ASJC Scopus subject areas

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