Winner’s Curse and the Hiring of Independent Auditors by State Companies in Brazil
DOI:
https://doi.org/10.51341/cgg.v27i1.3157Keywords:
Independent Auditing, Winner's Curse, Auditors' FeesAbstract
Objective: This research investigates the effect of the winner's curse on public hiring of independent audits.
Method: The study was quantitative, with 73 contracts via electronic procurement of state-owned companies between 2010 and 2020 for hiring independent audit firms. Data were analyzed using multiple linear regression and quantile regression.
Originality/Relevance: This is the first study conducted in Brazil using federal government electronic auction data to study the effect of the winner's curse.
Results: The results show that this type of contracting causes high competition among audit firms, increasing the variation between the estimated price and the contracted price, affecting fees, especially for initial audits. Using performance management as a proxy for audit quality, it was not possible to determine its influence. However, in the additional test, using MQO without the constant, the regression result indicates statistical significance.
Theoretical/Methodological contributions: The study used an available database to make a connection between the auction process that occurs in the federal public sector.
Social/Management contributions: Elements have been obtained that raise doubts about the effectiveness of the electronic auction for contracting independent auditing services.
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