The Role of Audit Firms in Spreading Depositor Contagion

• 成果类型: Article
• 署名作者: Beck, Matthew J.; Nicoletti, Allison K.; Stuber, Sarah B.
• 署名单位: University of Kansas; University of Pennsylvania; Texas A&M University System; Texas A&M University College Station; Mays Business School
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/TAR-2018-0381
• 发表日期: 2021
• 页码: 51-73
• 关键词: market discipline; juror evaluations; Hindsight bias; Bank runs; reputation; insurance; QUALITY; RISK; Clients; CONSEQUENCES

摘要

Auditor credibility is important in the banking industry due to the opacity of bank assets and the use of financial statements by external parties to facilitate monitoring. Depositors monitor and discipline bank behavior, but they can also contribute to the spread of shocks from one bank to another. We argue that depositors perceive bank failure as an audit failure, which reduces their assessment of auditor credibility. We document that exposure to failure through the audit firm is associated with lower uninsured deposit growth following the failure, consistent with depositors perceiving failures as a negative signal of auditor credibility. We further document that this association is stronger when depositors perceive connection to failure to reflect a pervasive issue within the audit firm. Collectively, our results suggest that depositors consider accounting signals at other banks in assessing financial reporting credibility.