Audit quality, auditor compensation and initial public offering underpricing

Chang, Xin, Gygax, André F., Oon, Elaine and Zhang, Hong Feng 2008, Audit quality, auditor compensation and initial public offering underpricing, Accounting and finance, vol. 48, no. 3, pp. 391-416, doi: 10.1111/j.1467-629x.2008.00275.x.

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Title Audit quality, auditor compensation and initial public offering underpricing
Author(s) Chang, XinORCID iD for Chang, Xin
Gygax, André F.
Oon, Elaine
Zhang, Hong FengORCID iD for Zhang, Hong Feng
Journal name Accounting and finance
Volume number 48
Issue number 3
Start page 391
End page 416
Total pages 26
Publisher Wiley-Blackwell Publishing Asia
Place of publication Milton, Qld
Publication date 2008-09
ISSN 0810-5391
Keyword(s) auditor quality
auditor compensation
initial public offering underpricing
Summary 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.
Language eng
DOI 10.1111/j.1467-629x.2008.00275.x
Field of Research 150102 Auditing and Accountability
Socio Economic Objective 970115 Expanding Knowledge in Commerce, Management, Tourism and Services
HERDC Research category C1 Refereed article in a scholarly journal
Copyright notice ©2008, The Authors
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Document type: Journal Article
Collections: Faculty of Business and Law
School of Accounting, Economics and Finance
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