Do audited firms have lower cost of debt?

Asif Huq, Fredrik Hartwig and Niklas Rudholm ()
Additional contact information
Asif Huq: School of Technology and Business Studies, Postal: Dalarna University, Borlänge, Sweden
Fredrik Hartwig: School of Technology and Business Studies, Postal: Dalarna University, Borlänge, Sweden,
Niklas Rudholm: HUI Research, Postal: Stockholm, Sweden

No 132, HUI Working Papers from HUI Research

Abstract: The purpose of this study is to investigate if audited financial statements add value for firms in the private debt market. Using an instrumental variable method, we find that firms with audited financial statements, on average, save 1.26 percentage points on cost of debt compared to firms with unaudited financial statements. We also find that using the big, well-known auditing firms does not yield additional cost of debt benefits. Lastly, we find that the effect of audit on cost of debt varies between industries. As such, we find that firms in industries that have been identified in previous studies to have a more complex information structure, and therefore more complex auditing process, also save more on cost of debt relative to other industries when audited.

Keywords: Audit reform; Audit complexity; SMEs; Private limited firms (search for similar items in EconPapers)
JEL-codes: D22 D24 M42 M48 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2018-05-02
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.hui.se/BinaryLoader.axd?OwnerID=3a57705 ... .pdf&Attachment=True Full text (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.hui.se/BinaryLoader.axd?OwnerID=3a577059-d869-4d1b-bff1-5673eefc3461&OwnerType=0&PropertyName=EmbeddedFile_8c56c6d9-6def-402b-acfe-0b66f66d0da0&FileName=Audit+reform+and+CoD_WP.pdf&Attachment=True [301 Moved Permanently]--> https://www.hui.se/BinaryLoader.axd?OwnerID=3a577059-d869-4d1b-bff1-5673eefc3461&OwnerType=0&PropertyName=EmbeddedFile_8c56c6d9-6def-402b-acfe-0b66f66d0da0&FileName=Audit+reform+and+CoD_WP.pdf&Attachment=True [301 Moved Permanently]--> https://hui.se/BinaryLoader.axd?OwnerID=3a577059-d869-4d1b-bff1-5673eefc3461&OwnerType=0&PropertyName=EmbeddedFile_8c56c6d9-6def-402b-acfe-0b66f66d0da0&FileName=Audit+reform+and+CoD_WP.pdf&Attachment=True)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hhs:huiwps:0132

Access Statistics for this paper

More papers in HUI Working Papers from HUI Research Handelns Forskningsinstitut, c/o HUI Research, Regeringsgatan 60, 103 29 Stockholm, Sweden. Contact information at EDIRC.
Bibliographic data for series maintained by Hans Seerar Westerberg ().