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Group audits and investment efficiency
Dissertation

Group audits and investment efficiency

Li-Jen Chen
Doctor of Philosophy (Ph.D.), Drexel University
Jun 2023
DOI:
https://doi.org/10.17918/00001567
pdf
Chen_Li-Jen_20231.23 MB
PDF Embargoed Access, Embargo ends: 30 Jun 2027

Abstract

Auditing
This study examines whether group audits can impact the investment efficiency of multinational companies (MNCs). I argue that group audits have a negative impact on investment efficiency because they can cause an opaque information environment and impair auditors' monitoring efficacy for the MNCs. Since inefficient investment takes forms of underinvestment and overinvestment, I hypothesize and find a conditional positive association between group audits and underinvestment (overinvestment) for MNCs in settings prone to underinvest (overinvest). That is, among MNCs that are likely to underinvest (overinvest), MNCs with group audits underinvest (overinvest) more. Furthermore, to reduce the concern that using group audits is a function of MNCs' characteristics, propensity score matching (PSM) and entropy balancing procedures are employed to pre-treat the sample. The results were held by using the treated samples. Several cross-sectional and additional robustness analyses are conducted and confirm that the results are not random. This study extends the emerging literature on the effect of group audits on audit outcomes and investors' responses by providing evidence that group audits can also impact business outcomes.

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