Graduate School of Business
655 Knight Way
Stanford, CA 94305
Institutional Affiliation: Stanford University
NBER Working Papers and Publications
|November 2017||On the Economics of Audit Partner Tenure and Rotation: Evidence from PCAOB Data|
with Luzi Hail, Christian Leuz: w24018
This paper provides the first partner tenure and rotation analysis for a large cross-section of U.S. publicly listed firms over an extended period. We analyze the effects on audit quality as well as economic tradeoffs related to partner tenure and rotation with respect to audit hours and fees. On average, we find no evidence for audit quality declines over the tenure cycle and little support for fresh-look benefits after rotations. Nevertheless, partner rotations have significant economic consequences. We find increases in audit fees and decreases in audit hours over the tenure cycle, which differ by partner experience, client size, and competitiveness of the local audit market. More generally, our findings are consistent with efforts by the audit firms to minimize disruptions and audit fa...
|September 2015||Public Audit Oversight and Reporting Credibility: Evidence from the PCAOB Inspection Regime|
with Christian Leuz, Mark Maffett: w21530
This paper studies the impact of public audit oversight on financial reporting credibility. We analyze changes in market responses to earnings news after public audit oversight is introduced, exploiting that the regime onset depends on fiscal year-ends, auditors, and the rollout of auditor inspections. We find that investors respond more strongly to earnings news following public audit oversight. Corroborating these findings, we find an increase in volume responses to 10-K filings after the new regime. Our results show that public audit oversight can enhance reporting credibility and that this credibility is priced in capital markets.