Bidder Gains in Takeovers with Shared Auditor

Abstract

Are abnormal returns in bidder and target companies higher in a takeover when auditor is shared? We find that abnormal returns are higher in bidder companies but weaker in target companies with a shared auditor compared to companies without both on announcement day and days before. The rationale is that a shared auditor contributes to better informed valuation. We obtain a sample of 202 mergers and acquisitions completed in Norway between 2005 and 2017. We use an event study methodology to uncover abnormal returns around the announcement period.