Title: Does auditor reputation reduce information asymmetry? Evidence from Tunisia

Authors: Faten Hakim, Abdelwahed Omri

Addresses: Research Unit in Finance and Strategy of Businesses, Faculty of the Economic Sciences and Management of Tunis, University Campus El Manar, B.P. 248 El Manar II, 2092 Tunis. ' Research Unit in Finance and Strategy of Businesses, Institute of Higher Management of Tunis, 41 Rue de la Liberte, Bouchoucha, Bardo, 2000, Tunis

Abstract: This paper examines the association between bid-ask spread, a market based measure of information asymmetry and auditor reputation. Based on a sample of 42 firms over a period from 2000 to 2006, we find that information asymmetry is negatively related to the employment of Big auditor after controlling the stock exchange, size, returns of the equity and volatility. Auditor Big seems to influence information asymmetry in regard to its impact on the bid-ask spread. Our results support that firms with audited by an auditor Big have lower bid-ask spreads and lower adverse selection spread components. These findings are consistent with a market that perceives audit quality increasing with employment of Big auditor.

Keywords: auditing; auditor Big; adverse selection; asymmetric information; bid-ask spread; Tunisia; listed firms; auditor reputation; audit quality.

DOI: 10.1504/IJMFA.2009.025054

International Journal of Managerial and Financial Accounting, 2009 Vol.1 No.3, pp.235 - 247

Published online: 11 May 2009 *

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