Should We Stay or Should We Go? Accountability, Status Anxiety, and Client Defections.

ARTHUR Andersen LLP; BUSINESS failures; CLIENT relations; CUSTOMER loyalty; REPUTATION; BUSINESS partnerships; BUSINESS enterprises; PEER pressure; AUDITOR-client relationships; ANXIETY

Focusing empirically on what affected client defections from Arthur Andersen during its dramatic collapse in 2002, this study proposes that accountability-induced status anxiety is an important factor in the dissolution of interfirm relationships. Status anxiety--concerns about being devalued because other actors question the quality of a firm's partners--can motivate firms to disassociate themselves from their compromised high-status partners to protect their own status position. I hypothesize that accountability triggers status anxiety when firms are directly accountable to important audiences, when firms are surrounded by other firms that already have disassociated themselves from common partners, and when firms have committed themselves to a particular level of partner quality. Event-history analyses provide strong support for the accountability perspective on status anxiety: firms surrounded by stronger audiences, more defecting firms, and stronger commitments to audit quality were themselves more likely to defect. [ABSTRACT FROM AUTHOR]

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