The dissertation examines IPO underpricing and long-term performance to assess
the use of industry specialization as a differentiation strategy by audit firms and
underwriters. Prior studies indicate that prestigious auditors or underwriters (e.g., Big 6
auditors) are associated with IPO underpricing. I extend existing literature by
incorporating market share as a refined measure of auditor (underwriter) reputation. In
particular, I define a differentiated auditor (underwriter) as the market leader that
possesses significantly higher market share than their competitors in the client industry. I
hypothesize that the impact of auditor (underwriter) reputation in the IPO setting
depends on whether the audit firm (underwriter) has successfully differentiated itself
from competitors within client industries. My results show that as audit firm
(underwriter) industry market share increases without differentiation, the IPO
underpricing increases. It appears that this group of auditors (underwriters) intentionally
engages in high-risk IPOs in order to gain fee advantages. In contrast, differentiated
auditors (underwriters) are related to lower IPO underpricing because their reputation assist in reducing information asymmetry between issuers and investors. My study is
important because it shows that the benefits previously thought to be attributable to a
very large set of auditors and underwriters stems primary
| Identifer | oai:union.ndltd.org:tamu.edu/oai:repository.tamu.edu:1969.1/4149 |
| Date | 30 October 2006 |
| Creators | Wang, Kun |
| Contributors | Wilkins, Michael |
| Publisher | Texas A&M University |
| Source Sets | Texas A and M University |
| Language | en_US |
| Detected Language | English |
| Type | Book, Thesis, Electronic Dissertation, text |
| Format | 392356 bytes, electronic, application/pdf, born digital |
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