Costs and benefits of audit quality in the IPO market: A self-selection analysis.
Year: 1997
Type: article
Abstract: This study examines the trade-offs that an entrepreneur makes in an initial public stock offering (IPO) between the incremental costs and benefits of selecting a Big 6 audit firm. The benefit of hiring a Big 6 auditor is assumed to be reduced underpricing, consistent with Beatty (1989) and Balvers et al. (1988). The cost of hiring a Big 6 auditor is higher auditor compensation. Evidence drawn from a sample of lPOs during the early 1990's is consistent with a differentiated market for audit services where owners select the type of auditor that minimizes the sum of underpricing and auditor compensation costs.
Source: The Accounting Review
Author: Chris E. Hogan
Institutions: Vanderbilt University, Michigan State University
Language: English
Subfield: Accounting
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2258020001