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How does accounting and auditing regulations affect firm growth and cost of capital?
Högskolan Dalarna, Akademin Industri och samhälle, Mikrodataanalys.
2018 (engelsk)Licentiatavhandling, med artikler (Annet vitenskapelig)
Abstract [en]

This thesis provides an understanding of how new audit regulation affect firm growth and how audits affect the cost of capital. To investigate the effect of audit reforms on employment growth, we exploited a Swedish reform made in November 2010 that gave certain firms the option to opt out of previously imposed statutory audits. We find that firms which fulfilled the requirements for voluntary auditing, compared to a control group of similar firms that did not, increased their employment growth rate by 0.39%. Furthermore, the reform was also exploited to investigate if audited financial statements add value for firms in the private debt market. 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. Thus, the reform creates a possibility for firms that have the ambition to grow in employment to do so by not auditing, and those who want to grow by investments in capital to do so by reducing the cost of such investments by auditing. However, the current ceiling of the reform is also likely to force some firms to operate at sub-optimal levels, those without having the option to opt out of audit even though they might not accrue any benefit from auditing, at least in the short-run. One can argue that is partly due to how institutions evolve, generally slower than other actors in the society do.

sted, utgiver, år, opplag, sider
Borlänge: Dalarna University, 2018.
Serie
Dalarna Licentiate Theses in Microdata Analysis ; 8
Emneord [en]
New institutional economics, firm growth, small business economics, regulatory reform, audit reform, mandatory audit, audit complexity, SMEs, private limited firms
HSV kategori
Forskningsprogram
Komplexa system - mikrodataanalys
Identifikatorer
URN: urn:nbn:se:du-28408ISBN: 978-91-85941-78-0 (tryckt)OAI: oai:DiVA.org:du-28408DiVA, id: diva2:1242434
Presentation
2018-09-25, Sal 311, Högskolan Dalarna, Borlänge, 10:00 (engelsk)
Opponent
Veileder
Tilgjengelig fra: 2018-08-28 Laget: 2018-08-28 Sist oppdatert: 2019-06-17bibliografisk kontrollert
Delarbeid
1. Free to choose: Do voluntary audit reforms increase employment growth?
Åpne denne publikasjonen i ny fane eller vindu >>Free to choose: Do voluntary audit reforms increase employment growth?
2018 (engelsk)Rapport (Fagfellevurdert)
Abstract [en]

Many European countries have abolished mandatory audits for small firms to reduce the regulatory and administrative burden for these firms. However, we still lack knowledge on whether such legislative changes affect employment growth for those firms that become free to choose to have external audits. We investigate this question using a Swedish reform that made audits voluntary for small firms fulfilling certain requirements. The reform created an almost ideal natural experiment, which we use to evaluate the effects of voluntary audits on employment growth for small firms using a difference-in-difference estimator. We find that firms which fulfilled the requirements for voluntary auditing, compared to a control group of similar firms that did not, increased their employment growth rate by 0.39%. This corresponds to 1,830 jobs being created in the year following the reform, suggesting that mandatory audits act as a growth barrier for small firms.

Serie
HUI Working Papers
Emneord
Firm growth; small business economics; regulatory reform; mandatory audit
HSV kategori
Forskningsprogram
Komplexa system - mikrodataanalys
Identifikatorer
urn:nbn:se:du-27352 (URN)
Tilgjengelig fra: 2018-03-07 Laget: 2018-03-07 Sist oppdatert: 2018-11-13bibliografisk kontrollert
2. Do audited firms have lower cost of debt?
Åpne denne publikasjonen i ny fane eller vindu >>Do audited firms have lower cost of debt?
2018 (engelsk)Rapport (Annet vitenskapelig)
Abstract [en]

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.

Publisher
s. 36
Serie
HUI Working Paper ; 132
Emneord
Audit reform, Audit complexity, SMEs, Private limited firms
HSV kategori
Forskningsprogram
Komplexa system - mikrodataanalys
Identifikatorer
urn:nbn:se:du-28407 (URN)
Tilgjengelig fra: 2018-08-28 Laget: 2018-08-28 Sist oppdatert: 2018-11-13bibliografisk kontrollert

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