Discussion of the Value of Financial Statement Verification in Debt Financing: Evidence from Private U.S. Firms

Journal of Accounting Research, Forthcoming

Posted: 6 Feb 2011

Multiple version iconThere are 2 versions of this paper

Date Written: January 31, 2011

Abstract

I discuss Minnis (2011) in the context of the broader literature on private firm financing. In particular, I focus on the unique features of the private firm setting and how it affects research design and inference. I detail the alternative information sources available to debt financiers of private firms that may limit the role of auditors and firm financial statements. I review research in the private firm setting that documents the heightened importance of many omitted correlated variables such as the loan characteristics, contractual terms, and the characteristics of the entrepreneur that affect cost of debt. In evaluating the validity of Minnis’s (2011) hypotheses and econometric methods, I report findings from a sample of private firms provided by the Federal Reserve Board’s Survey of Small Business Finances.

Keywords: Auditing, Cost of Capital, Earnings Persistence, Private Firms

JEL Classification: D82, G20, L14, M42

Suggested Citation

Cassar, Gavin, Discussion of the Value of Financial Statement Verification in Debt Financing: Evidence from Private U.S. Firms (January 31, 2011). Journal of Accounting Research, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1755180

Gavin Cassar (Contact Author)

INSEAD ( email )

Boulevard de Constance
Fontainebleau, 77305
France

HOME PAGE: http://https://www.insead.edu/faculty-research/faculty/gavin-cassar

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