Shared Auditors in Mergers and Acquisitions

Shared Auditors in Mergers and Acquisitions

Dan S. Dhaliwal University of Arizona – Department of Accounting

Phillip T. Lamoreaux university of arizona – Department of Accounting

Lubomir P. Litov University of Arizona – Department of Finance; University of Pennsylvania – Wharton Financial Institutions Center

Jordan Neyland The University of Melbourne; Financial Research Network (FIRN)

April 1, 2013

We examine the effect of shared auditors, defined as audit firms that provide audit services to both target and acquirer prior to an acquisition, on transaction outcomes. We find that shared auditors are frequently observed — in a quarter of all public acquisitions — and are associated with significantly lower deal premiums, lower target event returns, higher acquirer event returns, and higher deal completion rates. Moreover, targets are likelier to receive a bid from a firm that has the same auditor. These results are more pronounced when targets and acquirers are audited by the same office of the audit firm and are mitigated to an extent after the adoption of the Sarbanes-Oxley Act. Overall, our results suggest that the bidder benefits from sharing the same auditor with the target, in part because of the lower costs to learn about it.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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