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Do audited firms have lower cost of debt?
Högskolan Dalarna, Akademin Industri och samhälle, Mikrodataanalys.
Högskolan Dalarna, Akademin Industri och samhälle, Företagsekonomi. Högskolan i Gävle.ORCID-id: 0000-0002-5043-6289
HUI Research.
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.

sted, utgiver, år, opplag, sider
2018. , s. 36
Serie
HUI Working Paper ; 132
Emneord [en]
Audit reform, Audit complexity, SMEs, Private limited firms
HSV kategori
Forskningsprogram
Komplexa system - mikrodataanalys
Identifikatorer
URN: urn:nbn:se:du-28407OAI: oai:DiVA.org:du-28407DiVA, id: diva2:1242406
Tilgjengelig fra: 2018-08-28 Laget: 2018-08-28 Sist oppdatert: 2018-11-13bibliografisk kontrollert
Inngår i avhandling
1. How does accounting and auditing regulations affect firm growth and cost of capital?
Åpne denne publikasjonen i ny fane eller vindu >>How does accounting and auditing regulations affect firm growth and cost of capital?
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
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:nbn:se:du-28408 (URN)978-91-85941-78-0 (ISBN)
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

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