We investigate intra-industry information transfer to news of a significant corporate event, forced CEO turnover. Intra-industry information transfer occurs when announcements made by one or more firms in an industry contemporaneously affect stock prices of peer firms. We find results strongly consistent with information transfer in response to forced CEO turnover, as evidenced by significant cumulative abnormal returns for industry peer firms around the time of a turnover announcement. We further document that information transfer is stronger to turnovers that signal a firm-CEO mismatch prompted by changing industry conditions (Eisfeldt and Kuhnen 2013). Considering two moderating factors, we find weaker (stronger) information transfer when the CEO was replaced with an outsider (the announcing firm is an industry leader), providing additional evidence that forced CEO turnover at one firm can be indicative of industry-wide changes. Our study has important implications to financial analysts, investors, and boards of directors in assessing changing industry conditions in light of a forced CEO turnover at a peer firm.

Abstract Audit regulators around the world have expressed concern over market dominance by Big 4 accounting firms and the potential adverse effect it may have on the quality of audited financial statements. We use cross‐country variation in the audit market structure of 42 countries to examine two separate aspects of Big 4 dominance: (1) Big 4 market concentration as a group relative to non–Big 4 auditors; and (2) concentration within the Big 4 group in which one or more of the Big 4 firms is dominant relative to the other Big 4 firms. We find that in countries where the Big 4 (as a group) conduct more listed company audits, both Big 4 and non–Big 4 clients have higher quality audited earnings compared to clients in countries with smaller Big 4 market shares. In contrast, in countries where there is a greater concentration within the Big 4 group, we find that Big 4 clients have lower quality audited earnings compared to countries with more evenly distributed market shares among the Big 4. Thus concentration within the Big 4 group appears to be detrimental to audit quality in a country and of legitimate concern to regulators and policymakers. However, Big 4 dominance per se does not appear to harm audit quality and is in fact associated with higher earnings quality, after controlling for other country characteristics that potentially affect earnings quality.