Panel Cointegration Analysis of Audit Pricing Model

Panel Cointegration Analysis of Audit Pricing Model This paper addresses two issues that arise from testing and estimating cointegration in accounting research. The first issue is the failure to use more powerful cointegration tests by earlier researchers. This has led to the problem of low test power in the cointegration procedures employed in the earlier accounting literature. Another issue that has not received much attention in earlier studies of audit pricing is the endogeneity bias that arises from the endogenous nature of the regressors. Commonly used regressors such as auditee size and auditee complexity are endogenous and are often related to audit fees through a system of simultaneous equations. Endogeneity bias suggests that the conventional OLS estimators are biased. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Quantitative Finance and Accounting Springer Journals

Panel Cointegration Analysis of Audit Pricing Model

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Publisher
Springer Journals
Copyright
Copyright © 2005 by Springer Science + Business Media, Inc.
Subject
Finance; Corporate Finance; Accounting/Auditing; Econometrics; Operation Research/Decision Theory
ISSN
0924-865X
eISSN
1573-7179
D.O.I.
10.1007/s11156-005-7021-y
Publisher site
See Article on Publisher Site

Abstract

This paper addresses two issues that arise from testing and estimating cointegration in accounting research. The first issue is the failure to use more powerful cointegration tests by earlier researchers. This has led to the problem of low test power in the cointegration procedures employed in the earlier accounting literature. Another issue that has not received much attention in earlier studies of audit pricing is the endogeneity bias that arises from the endogenous nature of the regressors. Commonly used regressors such as auditee size and auditee complexity are endogenous and are often related to audit fees through a system of simultaneous equations. Endogeneity bias suggests that the conventional OLS estimators are biased.

Journal

Review of Quantitative Finance and AccountingSpringer Journals

Published: Jan 1, 2005

References

  • The Pricing of Audit Services: The Canadian Perspective
    Chung, D. Y.; Lindsay, W. D.
  • Auditor Brand Name Reputations and Industry Specializations
    Craswell, A. T.; Francis, J. R.; Taylor, S. L.
  • Audit Fees and Auditor Change; an Investigation of the Persistence of Fee Reduction by Type of Change
    Gregory, A.; Collier, P.

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