Economic Consequences of Implementing the Engagement Partner Signature Requirement in the UK

I investigate the effects of requiring the audit engagement partner (EP) signature and individual EP’s quality on information asymmetry, analysts’ forecast errors and forecast dispersion. I predict and find that, ceteris paribus, there is a significant decline in information asymmetry, analysts’ forecast errors and forecast dispersion from the pre- to post-EP signature period in the UK over both of short-term (e.g., 2008-2010) and long-term (e.g., 2004-2014). These findings hold when using a control sample approach and a different proxy for the information asymmetry, which indicate that my results are not likely due to the effect of concurrent events and correlated omitted variables. These findings provide timely and important empirical evidence to the ongoing debate about whether the Public Company Accounting Oversight Board should pass a similar requirement in the U.S.