AAA Spark Meeting of Regions

An Examination of Individual Investors’ Information Acquisition Surrounding Auditor Change Announcements

• In Event: Auditor Risk Assessment

Abstract

We study the demand for company information about an important audit related event, auditor change announcements, by using the search volume of company stock tickers on Google. In contrast to price reaction tests surrounding auditor changes, internet search volume more directly captures investor demand for information. While we find no overall increase in abnormal search volume surrounding auditor change announcements, we do find higher search volume around auditor changes for firms covered by relatively fewer analysts, suggesting that internet search is a more valuable tool in impoverished information environments. When conditioned on the context of the auditor change, we also find evidence that investors search for information more when the auditor resigns, when there has been a disagreement between the auditor and client regarding an accounting issue, or when the client moves from a non-Big 4 to a Big 4 auditor.

Authors

• Steve Kaplan, Arizona State University - Tempe

• Noah Myers, Arizona State University