Leader versus Lagger : How the Timing of Financial Reporting Affects Audit Quality and Investment Efficiency

This paper examines how the relative timing affects the quality of financial reports in a staggered reporting system. We show that the audit quality of the leader firm exceeds that of the lagger. Investment efficiency also differs systematically across firms depending on the relative reporting timing as well as the ownership structure of audit firms. We characterize optimal auditing standards and show, as regulatory tools, how imposing minimum audit quality requirement and adjusting auditors' legal liability complement and/or substitute