The evidence in this study indicates that larger audit firms and firms that are exposed to greater litigation risk are more
likely to become LLPs. This is consistent with these firms having stronger incentives to protect their partners’ personal
assets. Switching is costly, however, as an LLP firm is required to publicly disclose its financial statements and the financial
statements of large LLP firms are subject to independent audit. Our findings suggest that the audit requirement is costly
because it increases the rate at which the LLP firm loses clients to the firm that audits its financial statements.