Auditor Choice and Information Asymmetry: Evidence from International Syndicated Loans

Accounting and Business Research, Forthcoming

58 Pages Posted: 9 Jun 2017 Last revised: 15 Aug 2018

See all articles by Zhiming Ma

Zhiming Ma

Peking University

Derrald Stice

University of Hong Kong - Faculty of Business and Economics; HKU - Accounting Area - Faculty of Business and Economics

Rencheng Wang

The University of Melbourne; Singapore Management University - School of Accountancy

Date Written: June 15, 2018

Abstract

Analyzing a large sample of non-U.S. public firms from 31 countries that obtain private loans, we find that loan syndicates that lend to borrowers that employ Big N auditors are larger and less concentrated and that the lead arrangers and largest investors of these syndicates are able to hold a lower proportion of the loan after issuance. Further analysis demonstrates that this effect exists only in countries with strong creditor rights and in those countries with high levels of societal trust, suggesting that both sound formal and informal institutional factors are prerequisites for lenders and borrowers to benefit from differential audit quality on loan syndicate structure efficiency. Furthermore, we find that the loan syndicate structure benefits for borrowers that employ Big N auditors are higher for borrowers with greater information asymmetry problems, but we do not find that Big N audits are able to address the information asymmetry and moral hazard issues between the lenders themselves in the global debt market. Our results are robust to various additional tests that address endogeneity issues.

Keywords: Big N Auditors, International Debt Markets, Loan Syndicate Structure, Creditor Rights, Trust

JEL Classification: G01, M4, M49

Suggested Citation

Ma, Zhiming and Stice, Derrald and Wang, Rencheng, Auditor Choice and Information Asymmetry: Evidence from International Syndicated Loans (June 15, 2018). Accounting and Business Research, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2983010 or http://dx.doi.org/10.2139/ssrn.2983010

Zhiming Ma

Peking University ( email )

Department of Accounting
Guanghua School of Management
Beijing, 100871
China

Derrald Stice (Contact Author)

University of Hong Kong - Faculty of Business and Economics ( email )

Hong Kong, HK
China

HKU - Accounting Area - Faculty of Business and Economics ( email )

Hong Kong

Rencheng Wang

The University of Melbourne ( email )

Victoria
Melbourne, Victoria 3010 3010
Australia

Singapore Management University - School of Accountancy ( email )

60 Stamford Road
Singapore 178900
Singapore

Register to save articles to
your library

Register

Paper statistics

Downloads
388
Abstract Views
724
rank
74,391
PlumX Metrics