Common Auditors and Credit Costs in Times of Crisis: Evidence From the COVID‐19 Pandemic

Iftekhar Hasan, Joon Ho Kong, Haekwon Lee and Panagiotis Politsidis
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Iftekhar Hasan: Fordham University [New York]
Joon Ho Kong: Stevens Institute of Technology [Hoboken]
Haekwon Lee: The University of Sydney Business School
Panagiotis Politsidis: Audencia Business School

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Abstract: ABSTRACT We provide evidence that common auditors among lenders and borrowers mitigate the aggravating effect of COVID‐19 on syndicated loan pricing. Specifically, a common auditor alleviates lenders' COVID‐19 exposure constraints, resulting in a 2.5% decrease in the offered loan spread. This easing effect is magnified by the length of the auditor‐lender tenure; it is concentrated in loans between highly exposed lender–borrower pairs and, notably, further facilitates access to loan financing for auditor‐connected borrowers. Nonetheless, this does not constitute irresponsible lending behavior based on a comparison of ex post loan performance for borrowers with common auditors versus their non‐common‐auditor counterparts. Our results highlight an important yet overlooked function of common auditors: their ability to act as a broker between lenders and borrowers during periods of heightened stress.

Date: 2026-06-05
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Published in Journal of Business Finance and Accounting, 2026, pp.70074Digital. ⟨10.1111/jbfa.70074⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05647006

DOI: 10.1111/jbfa.70074

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