Auditor's Reputation, Equity Offerings, and Firm Size: The Case of Arthur Andersen

@article{YatesRauterkus2004AuditorsRE,
  title={Auditor's Reputation, Equity Offerings, and Firm Size: The Case of Arthur Andersen},
  author={Stephanie Yates Rauterkus and Kyojik “Roy” Song},
  journal={AFA 2004 San Diego Meetings (Archive)},
  year={2004}
}
We study the impact of Arthur Andersen's declining reputation on their clients. When Andersen clients issue seasoned equity, we find that the negative reaction to SEO announcements is two percent worse for SEOs audited by Andersen versus other Big Five firms. A median firm in our sample loses $31.4 million more than a non-Andersen client. This result supports the argument that the certifying and monitoring role of auditors is valuable to clients. We do not find any unusual underpricing for SEOs… 
Did Earnings Conservatism Increase for Former Andersen Clients?
The unexpected fall of Arthur Andersen is an extraordinary event. Although Arthur Andersen was initially convicted in 2002, subsequently, the Supreme Court unanimously threw out the conviction. Was
Information and self-selection in the PIPE market
PIPEs (Private Investments in Public Equity) are unique in that they are negotiated privately between sophisticated investors and the public firm. As a result, the issue price deviates from the
Auditor Changes and the Pricing of Seasoned Equity Offers
While prior literature examines the role of auditors in the pricing of initial public offerings, little is known about the effect of auditor changes on the pricing of seasoned offers. Our examination
A Basic Quantification of the Competitive Implications of the Demise of Arthur Andersen
Andersen’s exit from the already-concentrated market for auditing services is shown to have increased market concentration and audit fees. Changes in market concentration are found to be
The fragile returns to investor relations: evidence from a period of declining market confidence
This paper assesses the capital market effects of investor relations activities during a period of high-profile corporate scandals. We find no support for the prediction that an established
Managers’ Compensation and Misreporting: A Costly State Verification Approach
"We look for the optimal shareholder-manager contract leading to high effort and truthful revelation of firm performance. This twofold incentive compatibility constraint calls for a convex
Lawyers: Gatekeepers of the Sovereign Debt Market?
The claim that lawyers act as gatekeepers or certifiers in financial transactions is widely discussed in the legal literature. There has, however, been little empirical examination of the claim. We

References

SHOWING 1-10 OF 25 REFERENCES
Shredded Reputation: The Cost of Audit Failure
In this article we investigate the impact of the Enron audit failure on auditor reputation. Specifically, we examine Arthur Andersen’s clients’ stock market impact surrounding various dates on which
The Effect of Audit Quality on Earnings Management
This paper examines the relation between economic incentives to manage earnings and discretionary accruals and the modifying effects of audit quality on this relation. We hypothesize that incentives
The role of audits and audit quality in valuing new issues
Underwriter Reputation, Initial Returns, and the Long‐Run Performance of IPO Stocks
We find that the underperformance of IPO stocks relative to the market over a three-year holding period is less severe for IPOs handled by more prestigious underwriters. Consistent with prior
Initial Public Offerings and Underwriter Reputation
This paper examines the returns earned by subscribing to initial public offerings of equity. K. Rock (1986) suggests that initial public offerings of equity returns are required by uninformed
...
...