The Impact of Litigation Risk on Auditor Pricing Behavior: Evidence From Reverse Mergers
利用反向并购这一独特场景，研究发现诉讼风险导致审计费用增加约27%，且股权分散会放大这一效应，机构投资者在公私股权环境下均要求更高审计投入。
Abstract We use reverse mergers to examine the impact of litigation risk on audit fees. In a reverse merger, a private company merges with a public company, and the private company's management takes over the resulting publicly traded firm. Reverse mergers create a unique test setting to provide estimates on the litigation risk premium because, while the litigation risk for formerly private firms whose equity becomes publicly traded increases, the remaining auditee‐ and auditor‐related characteristics remain virtually unchanged. We document a litigation risk premium of approximately 27 percent. Moreover, we document that equity dispersion impacts the audit fee pricing of litigation risk and this relation is dramatically magnified in the publicly traded realm. Finally, we find that institutional investors demand higher audit effort in the form of higher audit fees in both the private‐ and public‐equity settings.