Graduation Year


Document Type




Degree Name

Doctor of Philosophy (Ph.D.)

Degree Granting Department

Business Administration

Major Professor

Dahlia Robinson, Ph.D.

Committee Member

Carlos Jimenez-Angueira, Ph.D.

Committee Member

Tom Smith, Ph.D.

Committee Member

Ninon Sutton, Ph.D.


Brokerage Merger/Closure, Information Asymmetry, Auditor Effort, Financial Reporting Quality


Prior research has established that analysts serve as an important monitor of managementand improve the quality of firms’ financial reporting. In this study, I utilize the natural experiment resulting from the mergers and closures of brokerage houses, to examine whether this exogenous change in firms’ information environment impacts the audit process. Specifically, I examine whether reductions in analyst coverage have an effect on auditor effort proxied by audit fees and audit report lag, as well as financial reporting quality, measured by future restatements. I find that client firms pay significantly higher audit fees following an exogenous reduction in analyst coverage but do not experience delays in issuance of audit reports, suggesting that the increase in auditor effort does not compromise audit report timeliness. On average, losing coverage from one analyst translates into a 5.2% increase in audit fees. In the high information asymmetry sample (i.e., firms in the lowest analyst coverage tercile), losing coverage from one analyst translates into a 7.8% increase in audit fees. Further, client firms are more likely to restate their financial statement following a decrease in analyst coverage, which is consistent with prior research findings that firms financial reporting quality deteriorate following a decrease in analyst coverage. Collectively, these results suggest that auditors respond quickly to changes in clients’ information environment.

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