Journal
JOURNAL OF ACCOUNTING & ECONOMICS
Volume 46, Issue 2-3, Pages 279-293Publisher
ELSEVIER SCIENCE BV
DOI: 10.1016/j.jacceco.2008.09.001
Keywords
Auditor reputation; Arthur Andersen; Event studies; Earnings response coefficients
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This paper tests the hypothesis that negative client stock returns following the revelation that Enron documents had been shredded are attributable to confounding effects as opposed to a loss of Andersen's reputation. We find that a sharp decline in oil prices along with differences in the industry composition of the Andersen and Big 4 client portfolios combine to produce significantly more negative returns for Andersen clients relative to Big 4 clients, and for Andersen's Houston office clients relative to its clients in other locations. The market reaction to two other Enron-related events also offers little support for a reputation effect. (C) 2008 Elsevier B.V. All rights reserved.
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