Mai Iskandar-Datta accepted for publication in the Journal of Financial Stability
Mike Ilitch School of Business professor of finance Mai Iskandar-Datta has been accepted for publication in the Journal of Financial Stability, which publishes rigorous theoretical and empirical research on macro and micro economics, and analysis of financial crises.
The article, titled “Auditor Certification and Long-Run Performance of IPO Stocks,” was co-authored by Sudip Datta, former Ilitch School professor of finance and current professor of finance and chair of the department of finance at the University of Missouri—Columbia, and the late Dr. Mark Gruskin, a former doctoral student at the Ilitch School.
Abstract:
This study establishes a significant positive relation between high quality auditors and long-run post-IPO equity performance. IPOs associated with high-ranked auditors benefit from superior information quality irrespective of underwriter rank, manifesting in significantly better post-IPO equity performance. The auditor certification effect is robust and persists longer than the underwriter certification effect. IPOs, regardless of the underwriter rank, benefit significantly from the auditor reputation effect. Further, the auditor certification effect is more pronounced: (a) when underwriter certification is weak (‘substitution effect’), and (b) in the presence of greater information asymmetry. VC backed IPOs perform significantly better; however, VC reputation has no effect, after controlling for auditor rank and underwriter certification. Our conclusions are reinforced by a battery of robustness checks, including the use of alternative methodologies to address endogeneity, audit quality proxies, performance metrics, model specifications, and validity tests.
