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

  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)},
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… 

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