External Appraisal, Auditing, and Information Asymmetries in the Real Estate Industry : European Evidence

This paper investigates whether the use of external investment property appraisers or the adoption of Big 4 auditors reduces information asymmetry across market participants in the real estate industry. The study exploits the annual reports of publicly traded real estate firms in the European Union over the period 2007–2016. The information asymmetry measures used are the firm’s percentage bid-ask spread and the standard deviation of analyst recommendations. The results suggest that firms that adopt an external property valuation trigger less information asymmetries among investors than companies that use internal valuation processes. In a similar vein, the findings indicate that the adoption of a Big 4 auditor reduces bid-ask spreads in the real estate industry.