Global Audit Firm Networks and Their Reputation Risk
研究了日本中央青山审计失败事件如何通过全球审计网络影响其他四大会计师事务所的客户股价，发现美国四大审计公司享有质量溢价，但网络声誉易受非美国成员所审计失败冲击。
The globalization of audit markets not only provides an opportunity for the U.S. Big 4 auditors to establish international expertise through global networks, but it also exposes them to reputation risk arising from the acts of their local partners. We analyze the audit failure of ChuoAoyama, one of the Japanese Big 4 audit firms, and find that its credibility impairment reduced security prices of not only the clients of PricewaterhouseCoopers (PwC), their U.S. affiliate, but also the American clients of all other Big 4 auditors affiliated with the Japanese Big 4. Because the quality of the U.S. audit firms is perceived as superior to that of auditors in other countries, we also analyze the premiums arising from the affiliation with the U.S.-led global audit firm networks. We compare the effect of Andersen’s audit failure with ChuoAoyama’s in Japanese capital markets and find that the magnitude of negative market reactions is larger for Andersen’s failure than for ChuoAoyama’s. Together, these results suggest that global audit firm networks have created a network-wide reputation for their services that is susceptible not only to audit failures of the U.S. Big 4 but also to those of non-U.S. affiliates and that there is a quality premium for the U.S. Big 4 in Japanese markets. Our results provide a rational explanation for PwC’s aggressive efforts to temper the negative impact of ChuoAoyama’s failure on their reputation.