Univariate Analysis

Univariate Analysis

Panel A: Mann-Whitney Tests for Differences in Means between Subsamples

Ext. Audit

OSP

No

Column B Variable

Column A

Column A

(column A)

(column B) (column C)

Column B

Column C

Column C

ASSETS 16. 231 11.149 11.681 5.082 4.550 -0.532 RDSALES 0. 008 0.009 0.012 -0.001 -0.004* -0.003* TROUBLE 0. 073 0.076 0.037 -0.003 0.036** 0.039** RECINV 0. 262 0.222 0.241 0.040 0.021 -0.019 RISKIND 0. 058 0.063 0.068 -0.005 -0.010 -0.005

ASSTGROW 11. 099 10.793 6.965 0.306 4.134** 3.828** ROA

0. 033 0.039 0.035 -0.006 -0.002 0.004 FORSALES% 0. 114

0.030* 0.037* GOVRNK 4. 899 5.255 4.895 -0.356 0.004 0.360 ACE 0. 250 0.603 0.555 -0.355** -0.305** 0.048 AUTHORITY 0. 600

-0.233** -0.166** 0.067 AC independ

AC meets 0. 588 0.603 0.627 -0.015 -0.039 -0.024 AC expertise

0.006 Sample firms

Panel B: Chi-square tests for differences in ACE

Firms outsourcing to

Firms not outsourcing to

Totals ACE = 0

ACE Value

external auditor

external auditor

56 61 117 ACE = 1

19 83 102 Totals 75 144 2 χ statistic = 10.55**

Panel C: Chi-square tests for differences in ACE*AUTHORITY

Firms outsourcing to

Firms not outsourcing to

ACE*AUTHORITY

Totals ACE*AUTHORITY=0 69

external auditor

external auditor

81 150 ACE*AUTHORITY=1 6

63 69 Totals 75 144 2 χ statistic = 6.975**

Note: *, ** represent significance levels at .05 and .01, respectively. All variables are defined in Table 2, with the exception of AC independence, AC meeting frequency and AC expertise. AC independence is a dichotomous variable coded ‘1’ for audit committees comprised entirely of independent directors, ‘0’ otherwise. AC meets is a dichotomous variable coded ‘1’ for audit committees that meet at least four times annually, ‘0’ otherwise. AC expertise is a dichotomous variable coded ‘1’ for audit committees containing at least one director with financial expertise, ‘0’ else.

TABLE 5 Logistic Regression Results Binary Use External Auditor Outsourcing

OUTAUD=b 0 +b 1 LN(ASSETS) + b 2 RDSALES + b 3 TROUBLE + b 4 RECINV +

b 5 RISKIND + b 6 ASSTGROW + b 7 ROA + b 8 FORSALES% +

b 9 GOVRNK + b 10 ACE + b 11 AUTHORITY + b 12 ACE*AUTHORITY + ε

Independent Variable

INTERCEPT ? -2.437 3.367 LN (ASSETS)

-0.308 0.543 ACE*AUTHORITY

-0.622 7.885** Observations 219 Pseudo R-squared 0.115

*, ** - differences are significant at p-levels of less than 0.05 and 0.01. All variable definitions per Table 2.

TABLE 6 Tobit Regression Results

Outsourcing Activities to Current External Auditor

AUDMIX%*OUTAUD% =b 0 +b 1 LN(ASSETS) + b 2 RDSALES + b 3 TROUBLE +

b 4 RECINV + b 5 RISKIND + b 6 ASSTGROW + b 7 ROA +

b 8 FORSALES% + b 9 GOVRNK + b 10 ACE + b 11 AUTHORITY

+b 12 ACE*AUTHORITY + ε

Model 1

Model 2

Dependent Variable

Dependent Variable

AUDRTMIX%*OUTAUD%

AUDNRMIX%*OUTAUD%

T Independent Variable

Expected Parameter

INTERCEPT ? -2.251 -2.222 -5.667 -3.457 LN (ASSETS)

0.778 0.565 0.098 0.551 RDSALES

-2.347 -1.099 -2.054 -0.905 TROUBLE

-3.501 -1.774* -2.158 -1.115 FORSALES%

3.722 1.871* 2.221 1.831* GOVRNK

-5.198 -0.704 -4.552 -0.649 ACE

-1.599 -4.224** -0.774 -0.745 AUTHORITY

2.444 0.011 1.077 0.198 ACE*AUTHORITY

-0.429 -3.011** -0.816 -1.013 Observations 219 219 Pseudo R-squared

*, ** - differences are significant at two-sided (one-sided if in predicted direction) p-levels of less than 0.05 and 0.01. All variable definitions per Table 2.

TABLE 7 Tobit Regression Results

Outsourcing Activities to other Outside Service Provider

OSPMIX%*OUTAUD% = b 0 +b 1 LN(ASSETS) + b 2 RDSALES + b 3 TROUBLE +

b 4 RECINV + b 5 RISKIND + b 6 ASSTGROW + b 7 ROA +

b 8 FORSALES% + b 9 GOVRNK + b 10 ACE + b 11 AUTHORITY

+b 12 ACE*AUTHORITY + ε

Model 1

Model 2

Dependent Variable

Dependent Variable

OSPRTMIX%*OUTAUD% AUDNRMIX%*OUTAUD%

T Independent Variable

Expected Parameter

INTERCEPT ? -3.773 -2.222 -2.853 -0.888 LN (ASSETS)

-0.452 -1.005 2.724 0.845 RDSALES

-2.289 -2.007* -1.082 -2.777** TROUBLE

4.115 2.432** 3.271 2.682** RECINV

2.664 1.012 1.076 0.597 RISKIND

-0.344 -0.487 -0.898 -1.002 ASSTGROW

0.225 2.053* 0.847 2.428** ROA

-1.477 -0.772 -3.729 -0.903 FORSALES%

2.555 1.773* 2.007 1.745* GOVRNK

-0.119 -0.547 -0.295 -0.654 ACE

0.998 -0.568 -0.111 -0.815 AUTHORITY

-1.554 -0.089 -0.008 -0.221 ACE*AUTHORITY

-0.112 -1.012 -0.052 -0.678 Observations

219 219 Pseudo R-squared

*, ** - differences are significant at two-sided (one-sided if in predicted direction) p-levels of less than 0.05 and 0.01. All variable definitions per Table 2.

TABLE 8 OLS Regression Results

External Auditor Outsourcers Subsample