What Does Reputation Buy? Differentiation in a Market for Third-Party Auditors

Esther Duflo, Michael Greenstone, Rohini Pande and Nicholas Ryan

American Economic Review, 2013, vol. 103, issue 3, 314-19

Abstract: We study differences in quality in the market for third-party environmental auditors in Gujarat, India. We find that, despite the low overall quality, auditors are heterogeneous and some perform well. We posit that these high-quality auditors survive by using their good name to insulate select client plants from regulatory scrutiny. We find two pieces of evidence broadly consistent with this hypothesis: (i) though estimates are not precise, higher-quality auditors appear to be paid more both in their work as third-party auditors and in their complementary work as consultants; and (ii) plants with high-quality auditors incur fewer costly penalties from the regulator.

JEL-codes: G32 M42 O13 O14 Q52 Q56 (search for similar items in EconPapers)
Date: 2013
Note: DOI: 10.1257/aer.103.3.314
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Citations: View citations in EconPapers (9)

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