The Value of Big N Target Auditors in Corporate Takeovers

Abstract

Using a large sample between 1987 and 2006, we document that firms with Big N auditors are (1) more likely to become merger and acquisition (M&A) targets, and (2) more likely to be ultimately acquired in M&A deals. Cross-sectional analyses further suggest that the effects of Big N target auditors on the likelihood of becoming targets and on deal completion rates are more pronounced for firms with low accruals quality (our proxy for high information risk). Overall, the results emphasize the important role that Big N target auditors play in facilitating M&A transactions.