We provide causal evidence on the agency cost explanation of the demand for high quality auditing. Using brokerage house closures/ mergers as a natural experiment to identify exogenous increases in agency costs arising from information asymmetry, we find that after experiencing exogenous...

We utilize the setting of the audit market consolidation in China to examine the effect of industry-specific knowledge transfer on audit performance. For each audit firm merger, we sort all client companies into the treatment and control groups based on the relative industry expertise of their...

This paper explores auditors’ information intermediary role by examining auditor-facilitated information transfer between clients. We find that a company is more likely to cite another company’s patents when they are audited by the same audit firm. This effect is stronger when the two...