Fair Value Opinion Shopping

• In Event: Behavioral Implications of the Auditor's Report

Abstract

This study reports the results of two experiments designed to provide empirical evidence related to fair value opinion shopping. Experiment 1 provides initial evidence that managers fair value opinion shop for external valuation professionals in the current regulatory environment. Further, the results of Experiment 1 suggest that informing managers that they are required to disclose to the board the fact that they obtained multiple opinions generally deters managers from fair value opinion shopping for personal benefits, but not for shareholder benefits. Experiment 2 shows that a regulatory change requiring firms to inform their auditor when they obtain multiple fair value opinions results in increased audit procedures and a reduction in auditors’ beliefs about the reliability of the second external valuation professional’s fair value opinion.

Author

• Leigh Salzsieder, University of Missouri-Kansas City