Common auditors and cross-country M&A transactions

Abstract

Using a comprehensive sample of cross-country mergers and acquisitions for the period 2000-2014 we examine the effect of common auditors on the efficiency of cross-country M & A transactions. We predict that the use of common auditors reduces uncertainty, resulting in higher M & A efficiency. We find that this common-auditor effect results in a positive market reaction to the M & A announcement, lower premium and greater increase in return on assets following the M & A transaction. Further, we find that these effects are more pronounced the greater the M & A transaction uncertainty and when the accounting standards of parties differ.