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Thursday 4 June, 3:00-4:30 pm
Virtually held on Zoom (link provided to registered attendees only)
Accounting for Negative Attention: Status and Costs in the Market for Audit Services
A large body of research in economic sociology and organization theory presumes that highstatus firms enjoy a significant cost advantage relative to their peers. The negative relationship between status and certain costs is attributed in part to exchange partners’ willingness to lower their fees for high-status clients so they may reap the visibility-related benefits of associating with them. However, affiliating with a high-status client can bring a seller not only positive but also negative attention. This is due to the additional scrutiny that high-status firms draw from the media and other actors. We propose that under certain conditions sellers will consider the possibility that negative attention directed at their high-status clients may spill over to them, and that they will accordingly charge their high-status clients more. To test this argument, we analyze fees paid by clients of varying status levels in the $60 billion U.S. market for audit services. Consistent with our arguments, we find that high-status clients tend to pay more than their peers. We show that this result is driven in part by auditors’ concern with negative attention, which is particularly strong when a client is associated with previous misconduct or belongs to a stigmatized industry.
Amandine Ody-Brasier (Yale University)
Amandine Ody-Brasier is an associate professor of organizational behavior at Yale SOM. She is interested in the social determinants of market behavior, especially price setting. In her research, she has examined the social construction of the market for Champagne grapes, highlighting the role of normative expectations and social relationships between market actors.
Her research has appeared in the Academy of Management Journal, Administrative Science Quarterly, American Sociological Review, Strategic Management Journal, and other outlets.
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