The Contagion Reputational Effects of Failed Individual Audit Partners: Evidence from an Audit Client Market
研究发现，同一审计办公室中未失败的合伙人，若缺乏良好业绩记录或与失败合伙人有团队合作经历，其客户市场份额会下降，表明声誉传染效应存在。
SUMMARY Prior research using individual auditor data shows that the stock market punishes the clients of failed auditors but not those of nonfailed auditors in the same tainted office (e.g., Li, Qi, Tian, and Zhang 2017). In this study, using audit client market share, we find similar results, but, more importantly, we document that the nonfailed partners’ client market shares decrease when they lack a track record to infer their audit quality credentials and when they reveal connections through teamwork experience with failed audit partners. In other words, nonfailed auditors in the same tainted office suffer contagion loss if there are no mitigating circumstances, such as a good track record or dissociation with failed auditors. These findings are novel in the literature and contribute to the empirical evidence for contagion effects in an individual partner reputational environment. JEL Classifications: M41; M42; M48