Auditors and client investment efficiency

Gil Soo Bae, Seung Uk Choi, Dan S. Dhaliwal, Phillip T. Lamoreaux

Research output: Research - peer-reviewArticle

Abstract

This study examines the relation between auditors and their clients' investment efficiency. We hypothesize and find that auditor characteristics that proxy for an auditor's knowledge and resources are associated with higher client investment efficiency, after controlling for the auditor's effect on financial reporting quality. This result is consistent with auditors providing informational advantages to their clients in a generalized investment setting. We find that this auditor effect is more pronounced for clients who have a higher demand for information as measured by client size, industry competition, and client complexity. The effect is also more pronounced for clients of longer-Tenured auditors. Overall, the results suggest that auditors may be one component to the management information environment and, as such, appear to influence capital investment behavior.

LanguageEnglish (US)
Pages19-40
Number of pages22
JournalAccounting Review
Volume92
Issue number2
DOIs
StatePublished - Mar 1 2017

Fingerprint

Auditors
Investment efficiency
Capital investment
Information environment
Resources
Management information
Investment behavior
Industry competition
Financial reporting quality

Keywords

  • Auditor incentives
  • Auditors
  • Information environment
  • Investment efficiency

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

Cite this

Bae, G. S., Choi, S. U., Dhaliwal, D. S., & Lamoreaux, P. T. (2017). Auditors and client investment efficiency. Accounting Review, 92(2), 19-40. DOI: 10.2308/accr-51530

Auditors and client investment efficiency. / Bae, Gil Soo; Choi, Seung Uk; Dhaliwal, Dan S.; Lamoreaux, Phillip T.

In: Accounting Review, Vol. 92, No. 2, 01.03.2017, p. 19-40.

Research output: Research - peer-reviewArticle

Bae, GS, Choi, SU, Dhaliwal, DS & Lamoreaux, PT 2017, 'Auditors and client investment efficiency' Accounting Review, vol 92, no. 2, pp. 19-40. DOI: 10.2308/accr-51530
Bae GS, Choi SU, Dhaliwal DS, Lamoreaux PT. Auditors and client investment efficiency. Accounting Review. 2017 Mar 1;92(2):19-40. Available from, DOI: 10.2308/accr-51530
Bae, Gil Soo ; Choi, Seung Uk ; Dhaliwal, Dan S. ; Lamoreaux, Phillip T./ Auditors and client investment efficiency. In: Accounting Review. 2017 ; Vol. 92, No. 2. pp. 19-40
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