Costs of Public Auditor Oversight: Real Earnings Management and Innovation Loss
研究PCAOB检查监督如何导致企业增加真实盈余管理（一种损害价值的行为），并发现这种监督与创新减少相关，尤其对削减研发支出的企业影响更大。
SUMMARY Prior research documents positive effects of PCAOB oversight on reporting and audit quality. However, to have a clear understanding of the net benefits of regulation, it is important to also investigate corresponding costs. To this end, we investigate the relation between PCAOB inspection oversight and real earnings management, a potentially value-destroying activity. We exploit the staggered timing of foreign governments’ allowance of PCAOB inspections in a generalized difference-in-differences design and find that companies engage in greater REM after the introduction of PCAOB inspection oversight. This relation is stronger for companies with a reduced ability to manage earnings via accruals. Lastly, we find a negative association between PCAOB oversight and innovation, particularly for firms making larger discretionary cuts to R&D expenditures. Collectively, our findings document unintended consequences of auditor regulatory oversight. JEL Classifications: G38; M41; M42; M48.