Dalarna University's logo and link to the university's website

du.sePublications
Change search
CiteExportLink to record
Permanent link

Direct link
Cite
Citation style
  • apa
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • chicago-author-date
  • chicago-note-bibliography
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf
How does accounting and auditing regulations affect firm growth and cost of capital?
Dalarna University, School of Technology and Business Studies, Microdata Analysis.ORCID iD: 0000-0003-2952-7327
2018 (English)Licentiate thesis, comprehensive summary (Other academic)
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.

Place, publisher, year, edition, pages
Borlänge: Dalarna University, 2018.
Series
Dalarna Licentiate Theses ; 8
Keywords [en]
New institutional economics, firm growth, small business economics, regulatory reform, audit reform, mandatory audit, audit complexity, SMEs, private limited firms
National Category
Business Administration Computer and Information Sciences
Research subject
Research Profiles 2009-2020, Complex Systems – Microdata Analysis
Identifiers
URN: urn:nbn:se:du-28408ISBN: 978-91-85941-78-0 (print)OAI: oai:DiVA.org:du-28408DiVA, id: diva2:1242434
Presentation
2018-09-25, Sal 311, Högskolan Dalarna, Borlänge, 10:00 (English)
Opponent
Supervisors
Available from: 2018-08-28 Created: 2018-08-28 Last updated: 2023-08-17Bibliographically approved
List of papers
1. Free to choose: Do voluntary audit reforms increase employment growth?
Open this publication in new window or tab >>Free to choose: Do voluntary audit reforms increase employment growth?
2018 (English)Report (Refereed)
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.

Series
HUI Working Papers
Keywords
Firm growth; small business economics; regulatory reform; mandatory audit
National Category
Business Administration
Research subject
Research Profiles 2009-2020, Complex Systems – Microdata Analysis
Identifiers
urn:nbn:se:du-27352 (URN)
Available from: 2018-03-07 Created: 2018-03-07 Last updated: 2021-11-12Bibliographically approved
2. Do audited firms have lower cost of debt?
Open this publication in new window or tab >>Do audited firms have lower cost of debt?
2018 (English)Report (Other academic)
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 0.47 percentage points on the cost of debt compared to firms with unaudited financial statements. We also find that using the big, well-known auditing firms does not yield any additional cost of debt benefits. Lastly, we investigate if there are industries where alternative sources of information make auditing less valuable in reducing the cost of debt. Here we find that auditing is less important in lowering cost in one industry, agriculture, where one lender has a 74% market share and a 100-year history of lending to firms within that industry. As such, it seems that lenders having high exposure to a certain industry might act as an alternative to auditing in reducing the information asymmetry between the firm and the lender.

Publisher
p. 36
Series
HUI Working Paper ; 132
Keywords
External Audit, Regulation, Agency Theory, Audit reform, Audit complexity, Cost of capital, Endogenous switching model, Private limited firms
National Category
Business Administration
Research subject
Research Profiles 2009-2020, Complex Systems – Microdata Analysis
Identifiers
urn:nbn:se:du-28407 (URN)
Available from: 2018-08-28 Created: 2018-08-28 Last updated: 2021-11-12Bibliographically approved

Open Access in DiVA

fulltext(555 kB)999 downloads
File information
File name FULLTEXT01.pdfFile size 555 kBChecksum SHA-512
51059d6f4e2d4aa6521c62d36f2cacfae84388d7ad9ffb659fcf5ebb38487b4d5ec2f75e22a6a99df852879f9c4d6d98ea9558776c275695bff4a162264fe6b9
Type fulltextMimetype application/pdf

Authority records

Huq, Asif M

Search in DiVA

By author/editor
Huq, Asif M
By organisation
Microdata Analysis
Business AdministrationComputer and Information Sciences

Search outside of DiVA

GoogleGoogle Scholar
Total: 999 downloads
The number of downloads is the sum of all downloads of full texts. It may include eg previous versions that are now no longer available

isbn
urn-nbn

Altmetric score

isbn
urn-nbn
Total: 1077 hits
CiteExportLink to record
Permanent link

Direct link
Cite
Citation style
  • apa
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • chicago-author-date
  • chicago-note-bibliography
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf