NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Mark G. Maffett

Booth School of Business
University of Chicago
5807 S. Woodlawn Ave
Chicago, IL 60637

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Institutional Affiliation: University of Chicago

NBER Working Papers and Publications

September 2015Public Audit Oversight and Reporting Credibility: Evidence from the PCAOB Inspection Regime
with Brandon Gipper, Christian Leuz: 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.
 
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