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Journal of Accounting and Economics Vol. 70 No. 1 2020

PCAOB international inspections and Merger and Acquisition outcomes

Yongtae Kim1,2; Lixin (Nancy) Su; Gaoguang (Stephen) Zhou; Xindong (Kevin) Zhu

1 Korea Advanced Institute of Science and Technology · 2 Santa Clara University

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.

DOI
10.1016/j.jacceco.2020.101318
Volume
70
Issue
1
Pages
101318
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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