What Does Reputation Buy? Differentiation in a Market for Third-Party Auditors
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Duflo_What does.pdf
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Author(s)
Duflo, Esther
Greenstone, Michael
Pande, Rohini
Ryan, Nicholas
Date Issued
May 2013
Journal
American Economic Review
Publisher
American Economic Association
Citation
Duflo, Esther, Michael Greenstone, Rohini Pande, and Nicholas Ryan. “What Does Reputation Buy? Differentiation in a Market for Third-Party Auditors.” American Economic Review 103, no. 3 (May 2013): 314-319.
Version
Author's final manuscript
Abstract
We study differences in quality in the market for third-party environmental auditors in Gujarat, India. We find that, despite the low overall quality, auditors are heterogeneous and some perform well. We posit that these high-quality auditors survive by using their good name to insulate select client plants from regulatory scrutiny. We find two pieces of evidence broadly consistent with this hypothesis: (i) though estimates are not precise, higher-quality auditors appear to be paid more both in their work as third-party auditors and in their complementary work as consultants; and (ii) plants with high-quality auditors incur fewer costly penalties from the regulator.
MIT Department
Massachusetts Institute of Technology. Department of Economics
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Article is made available in accordance with the publisher's policy and may be subject to US copyright law. Please refer to the publisher's site for terms of use.
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DOI of Published Version
https://doi.org/10.1257/aer.103.3.314
