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A two-sided matching model of the audit market for IPO firms

Li, Ken, McNichols, Maureen F. and Raghunandan, Aneesh (2018) A two-sided matching model of the audit market for IPO firms. .

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Identification Number: 10.2139/ssrn.3117828


We estimate a two-sided matching model of IPO firms to auditors. Doing so allows us to separate the effects of sorting and influence in this audit market, and identify the effect that each has on observed audit quality. We find evidence that sorting on inherent quality of the client exists at the time auditors and clients match with each other. However, even after controlling for the effects of sorting, Big 4 auditors exert positive influence on audit quality; the probability of a restatement is significantly lower, all else equal, for clients of Big 4 auditors.

Item Type: Monograph (Working Paper)
Additional Information: © 2018 The Author
Divisions: Accounting
Subjects: H Social Sciences > HG Finance
Date Deposited: 18 Sep 2019 14:45
Last Modified: 12 Sep 2020 23:10

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