Auditor Reputation, Auditor Independence and the Underpricing of IPOs

Abstract

We investigate the effect of reputation and independence of auditors on IPO underpricing. Auditor reputation and independence may reduce asymmetric information that exists between companies going public and external investors, therefore decreasing IPO underpricing. Multi-variable regression analysis of a sample consisting of IPOs from the period around SOX is performed. Results show that auditor independence does, but auditor reputation does not, reduce IPO underpricing