Audit quality, auditor compensation and initial public offering underpricing

Xin Chang, André F. Gygax, Elaine Oon and Hong Feng Zhang

Accounting and Finance, 2008, vol. 48, issue 3, pages 391-416

Abstract: We jointly study the impact of audit quality on auditor compensation and initial public offering (IPO) underpricing using a sample of Australian firms going public over the period 1996-2003. We find that quality (Big Four) audit firms earn significantly higher fees than non-Big Four auditors, and audit quality is positively associated with IPO underpricing. The positive relation between audit quality and underpricing is more pronounced for small issues, IPOs underwritten by non-prestigious underwriters, and those that are not backed by venture capitalists. Taken together, our results suggest that quality auditors serve as a signalling device that enhances post-issue market value of equity. Copyright (c) 2008 The Authors. Journal compilation (c) 2008 AFAANZ.

Date: 2008

Downloads: (external link)
http://www.blackwell-synergy.com/doi/abs/10.1111/j.1467-629X.2008.00275.x link to full text (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:bla:acctfi:v:48:y:2008:i:3:p:391-416

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0810-5391

Access Statistics for this article

Accounting and Finance is edited by Robert Faff

More articles in Accounting and Finance from Accounting and Finance Association of Australia and New Zealand
Series data maintained by Christopher F. Baum ().