Auditor Changes Following Big Eight Mergers With Non Big Eight Audit Firms
Auditor Changes Following Big Eight Mergers With Non Big Eight Audit Firms
Paul M Healy
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LEV = Long-term liabilities at the beginning of the merger year deflated by the book value of the firm. V = Natural logarithm of the book value of the firm in the year of the auditor merger (in OOO's). AV = The average percentage growth rate for assets in the three years prior to the merger. The independent variables are likely to be correlated. A correlation matrix, presented in Table ^, confirms the existence of collinearity. Four of V the ten correlation coefficients are more than two standa...rd deviations from zero (the critical value is . 210). Collinearity implies that the individual coefficients cannot be precisely estimated and that the estimates are sensitive to adding or dropping independent variables and observations. The signs of the coefficients on the explanatory variables generally reinforce the univariate test results. The coefficients are consistent with our predictions for three of the five variables. Corporate size and growth in size are positively related to the probability of remaining with the acquiring Big Eight firm.
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