Christopher Bleibtreu holds a doctoral degree from the University of Konstanz and was Junior Professor of Accounting at the Department of Economics at the University of Konstanz until 2018. In 2019, he became Associate Professor of Accounting at BI Norwegian Business School. Since 2022, he is Professor of Accounting at the Department of Accounting and Operations Management at BI. His research interests are auditing, corporate governance, and financial accounting; his (main) research method is analytical modeling.
Publications
Bleibtreu, Christopher & Stefani, Ulrike (2022)
The interdependence between market structure and the quality of audited reports: the case of non-audit services
This paper addresses the effects of a prohibition of providing non-audit services (NAS) to audit clients. By combining a strategic auditor–client game with a circular market-matching model that has an endogenous number of auditors, we take into account the interdependence between the auditors’ and clients’ incentives, the market structure, and the quality of audited reports. We show that the regulation’s effects depend on the preexisting audit market concentration and the types of blacklisted NAS. In sharp contrast to the effects that regulators desire, a prohibition of providing NAS to audit clients can further increase audit market concentration and decrease the quality of audited reports if the fees that auditors previously earned from providing the blacklisted NAS were relatively high, compared to the reduction in audit costs that result from spillovers. In contrast, a prohibition of the NAS that generate intense spillovers and low NAS fees can have the unexpected—but desired—effect of decreasing market concentration; however, reporting quality also decreases.
Bleibtreu, Christopher; Königsbruber, Roland & Lanzi, Thomas (2022)
Financial reporting and corporate political connections: An analytical model of interactions
We analyze the interactions between accounting institutions and corporate political connections (CPCs). We present a model where a costly policy depends on the perceived economic condition of a firm. This policy and the valuation of the firm by capital market participants create incentives for the firm to manipulate its financial reports. A politician has some discretion over the policy and can use it to favor a connected firm. Our analysis reveals that the firm’s financial reporting is determined by the interplay of an accounting standard, enforcement strictness, and the salience of the policy for the firm. The possibility to manipulate the financial reports imposes an upper boundary on the value of political connectedness which does not exist if only truthful reporting is possible. The reason is that a low credibility of reported figures leads only to a weak revision of the policy. In general, the value of CPCs is highest when the financial reporting regime evenly splits between firms in good and bad economic condition. Our analysis further suggests that while connected firms generally report being in good condition more often than non-connected firms do, the effect of CPCs on absolute reporting manipulation depends on policy salience. If policy salience is low, connected firms exhibit a higher absolute degree of manipulation than non-connected firms do; the opposite holds if policy salience is high.
Bleibtreu, Christopher & Stefani, Ulrike (2021)
Audit Regulations, Audit Market Structure, and Financial Reporting Quality
Foundations and Trends® in Accounting, 16(1-2), s. 1- 183. Doi: 10.1561/1400000066
In order to reduce the high level of concentration in the market segment of statutory audits of listed companies and to improve audit quality, new audit market regulations have been introduced (e.g., the mandatory rotation of the audit firm in the EU and the prohibition of single-provider auditing and consulting in the EU and in the U.S.). Other measures are currently discussed (e.g., joint audits or shared audits in the UK). However, the empirical evidence as to whether such regulations have the expected effects and whether there is actually a negative correlation between concentration and audit quality is mixed. This could be because the effects of regulatory measures on auditor and auditee incentives and their effects on market structure are interdependent, and, moreover, simultaneously determine audit quality. We therefore do not only provide a structured overview of the empirical literature on the effects of audit market regulations, but also discuss how to analyze these effects based on analytical models.
Bleibtreu, Christopher & Stefani, Ulrike (2018)
Auditor Incentives and the Structure of the Audit Market – A Basic Model for Investigating Simultaneous Effects of Audit Market Regulations
BFuP. Betriebswirtschaftliche Forschung und Praxis, 70(4), s. 416- 439.
For decades, legislators worldwide have been discussing the merits of regulating their national audit markets. In this debate, the focus has primarily been on the regulations’ effects on incentives, both those of preparers of financial statements to report truthfully and those of auditors to detect errors or even fraud and to correctly report their findings to the public. For some of the proposed measures, the empirical evidence as to whether they indeed improve such incentives remains inconclusive. In addition, there is a concern that certain regulations could negatively affect the structure of the audit market. Changes in the market structure, in turn, can either attenuate or reinforce the regulations’ effects on preparers’ and auditors’ incentives. To a large extent, this unintended side-effect has been neglected in the discussions. We adapt a spatial competition model to the audit market. This model allows simultaneously analyzing the incentive and market structure effects resulting from regulations and thus determining their overall impact
Bleibtreu, Christopher & Stefani, Ulrike (2018)
The Effects of Mandatory Audit Firm Rotation on Client Importance and Audit Industry Concentration
Recently, a system of audit firm rotation has been implemented for the audits of listed companies conducted in the European Union (EU). In the U.S., in contrast, the regulator decided against such rotation. Whereas proponents argue that rotation would strengthen independence and decrease audit market concentration, opponents stress the importance of auditors' learning effects, which would be eliminated by a change in auditors. In extending the market matching model of Salop (1979), we provide an analysis that integrates these contradictory views. We assume that both auditors' industry expertise and their experience in auditing a client decrease audit costs. We investigate the bidding strategies applied to re-acquire clients that were lost due to rotation, auditors' profit contributions, the equilibrium number of auditors (i.e., audit market concentration), and the economic importance of specific clients. Our findings indicate that the regulators' goals of simultaneously decreasing client importance and audit market concentration are in direct conflict and, therefore, the rotation system might have unintended consequences. Our model, thus, suggests how different institutional parameters give rise to economic forces that can support diverging decisions regarding the implementation of MAR.
In its recently published Green Paper, the European Commission (Audit policy: lessons from the crisis. Brussels, 2010) discusses various methods to enhance the reliability of audits and to re-establish trust in the financial market. The Commission primarily focuses on increasing auditor independence and on reducing the high level of audit market concentration. Based on a model in the tradition of the circular market matching models introduced by Salop (Bell J Econ 10(1):141–156, 1979), we show that prohibiting non-audit services as a measure intended to improve auditor independence can have counter-productive secondary effects on audit market concentration. In fact, our model demonstrates that incentives for independence and the structure of the audit market are simultaneously determined. Because market shares are endogenous in our model, it is not even clear that prohibiting non-audit services indeed increases an auditor’s incentive to remain independent.
Bleibtreu, Christopher; Khalilov, Akram & Königsgruber, Roland (2023)
Accounting institutions and the value of corporate political activity
[Academic lecture]. Annual Congress of the EAA.
Bleibtreu, Christopher; Biehl, Henrike & Plietzsch, Elisabeth (2023)
The Effects of Small Audit Firm Networks on Audit Market Competition and Audit Market Efficiency
[Academic lecture]. ARFA Workshop.
Bleibtreu, Christopher & Königsgruber, Roland (2022)
More than just regulatory capture: The intricate effects of political connections on corporate reporting
[Academic lecture]. University of Zurich: Research seminar in Accounting, Auditing & Governance.
Bleibtreu, Christopher; Biehl, Henrike & Stefani, Ulrike (2022)
The Effects of Joint Audits on Audit Quality and Audit Costs: A Game-theoretical Explanation for Contradictory Empirical Results
[Academic lecture]. VHB Annual Meeting.
Bleibtreu, Christopher; Biehl, Henrike & Stefani, Ulrike (2022)
The Effects of Joint Audits on Audit Quality and Audit Costs: A Game-theoretical Explanation for Contradictory Empirical Results
[Academic lecture]. ARFA Workshop.
Bleibtreu, Christopher; Biehl, Henrike & Stefani, Ulrike (2021)
The Effects of Joint Audits on Audit Quality and Audit Costs: A Game-theoretical Explanation for Contradictory Empirical Results
[Academic lecture]. AAA Annual Meeting.
Bleibtreu, Christopher; Biehl, Henrike & Stefani, Ulrike (2021)
The Effects of Joint Audits on Audit Quality and Audit Costs: A Game-theoretical Explanation for Contradictory Empirical Results