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dc.contributor.authorHvide, Hans K.
dc.date.accessioned2006-07-13T07:27:02Z
dc.date.available2006-07-13T07:27:02Z
dc.date.issued2004-08
dc.identifier.issn1500-4066
dc.identifier.urihttp://hdl.handle.net/11250/163673
dc.description.abstractThe paper develops a theory which attempts to understand segmentation and fee-setting in certification markets. The basis for the theory is that certifiers offer differentiated tests; for a given object it may be more difficult to pass the test of certifier i than the test of certifier j. Given the test standards, certifiers compete for customers via their fee-setting. In equilibrium, sellers with low unobservable quality self-select to a lenient test and sellers with high unobservable quality self-select to a stricter test. Moreover, sellers selecting an easy test pay a lower (endogenous) certification fee than sellers selecting a difficult test. As a test of the theory, I analyze Norwegian panel data to investigate whether firms affilated with a cheaper or a non-Big 5 auditor have worse (unobservable) characteristics, measured by subsequent drops in sales, assets or equity. The empirical analysis supports the theory.en
dc.format.extent303180 bytes
dc.format.mimetypeapplication/pdf
dc.language.isoengen
dc.publisherNorwegian School of Economics and Business Administration. Department of Finance and Management Scienceen
dc.relation.ispartofseriesDiscussion paperen
dc.relation.ispartofseries2004:10en
dc.subjectadverse selectionen
dc.subjectauditingen
dc.subjectinvestment bankingen
dc.subjectoligopoly theoryen
dc.subjectsignalingen
dc.titleA theory of certification with an application to the market for auditing servicesen
dc.typeWorking paperen


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