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Auditor's Reputation and Equity Offerings: The Case of Arthur Andersen
Author(s) -
Rauterkus Stephanie Yates,
Song Kyojik “Roy”
Publication year - 2005
Publication title -
financial management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.647
H-Index - 68
eISSN - 1755-053X
pISSN - 0046-3892
DOI - 10.1111/j.1755-053x.2005.tb00121.x
Subject(s) - issuer , reputation , accounting , equity (law) , audit , business , sample (material) , basis point , point (geometry) , financial economics , economics , finance , political science , interest rate , law , chemistry , geometry , mathematics , chromatography
The certifying and monitoring role of auditors is valuable to clients. By examining the impact of Arthur Andersen's worsening reputation on its clients, we find a 200 basis point more negative reaction to seasoned equity offering (SEO) announcements for firms audited by Andersen. The median firm in our sample loses 31.4 million more than a non‐Andersen client. We do not find any unusual underpricing for these SEOs, which suggests that any accounting concerns about the issuers are resolved before the issue dates.