NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Mark G. Maffett

Booth School of Business
University of Chicago
5807 S. Woodlawn Ave
Chicago, IL 60637

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NBER Working Papers and Publications

September 2015Public Audit Oversight and Reporting Credibility: Evidence from the PCAOB Inspection Regime
with Brandon Gipper, Christian Leuz: w21530
This paper examines how audit oversight by a public-sector regulator affects investors’ assessments of reporting credibility. We analyze whether market responses to unexpected earnings releases increase following the introduction of the Public Company Accounting Oversight Board (PCAOB), as predicted by theory if the new regime enhances reporting credibility. To identify the effects, we use a difference-in-differences design that exploits the staggered introduction of the inspection regime, which affects firms at different points in time depending on their fiscal year-ends, auditors, and the timing of PCAOB inspections. We find that market responses to unexpected earnings increase significantly following the introduction of the PCAOB inspection regime. Corroborating these findings, we also ...
 
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