Events

Dr. Bohan Song
Visiting Assistant Professor of Accounting
A. B. Freeman School of Business
Tulane University

I examine the effect of auditors’ industry specialization at the asset level. Focusing on insurance companies whose assets comprise investment in financial securities across a wide range of industries, I provide initial evidence that audit firms’ specialization in a security’s industry is associated with a higher quality of the security’s fair value estimate. Cross-sectional tests indicate that the effect of security-level industry specialization is more pronounced for securities with higher estimation uncertainty, for securities from non-insurance industries, and when insurers inflate fair values. Security-level analyses with fixed effects bolster the identification, and several robustness analyses further mitigate endogeneity concerns and address alternative explanations. In this study, I show a spillover effect of auditors’ industry specialization to clients operating in different industries.