In this paper we investigate whether voluntarily disclosed reasons for auditor‐client realignments (as encouraged by the SEC) have information content for investors. After classifying realignment reasons into two types—verifiable and non‐verifiable, with the latter representing disclosures about the auditor‐client relationship not evident from alternative sources—we find that, as predicted by the “good news” precept of theoretical signaling models, non‐verifiable realignment reasons are positively associated at the time of their announcement with abnormal returns. We also investigate whether voluntarily disclosed realignment reasons are associated with the relative size of the predecessor or successor auditor. We find that clients are more likely to cite service‐related (non‐verifiable) reasons when dismissing large predecessor auditors, and are more likely to cite fee‐related (non‐verifiable) reasons when choosing small successor auditors. These findings are consistent with auditors competing for the clients of large auditors by offering better or broader services, and with smaller auditors competing based upon price. All of our findings are robust to controlling for mandatory auditor change disclosures (auditor‐client disagreements, reportable events, and goingconcern opinions), and operating, financing, and investing activities found in prior research to be associated with auditor changes.

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