The Effect of Auditor Reputation on the Pricing of Accruals: Evidence from Privately Held Companies
58 Pages Posted: 19 Jun 2006
Date Written: June 2006
Abstract
The aim of this paper is to test whether the pricing of accruals depends on auditor reputation. Using a wide sample made up of Spanish privately held firms for the period 1996-2002, we show that the inverse correlation between accruals quality and cost of debt reported by Francis et al. (2005) only holds when the auditor belongs to a Big 4 firm. When the auditors are national majors or local audit firms, an increase of accruals quality does not lead to a significant decrease in the cost of debt.
Keywords: cost of debt, accruals quality, auditor quality, auditor reputation
JEL Classification: M41, G32
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
The Value of Verification in Debt Financing: Evidence from Private U.S. Firms
-
Voluntary Audits and the Cost of Debt Capital for Privately Held Firms: Korean Evidence
By Jeong-bon Kim, Dan A. Simunic, ...
-
Voluntary Audit and the Cost of Debt Capital for Privately Held Firms: Korean Evidence
By Dan A. Simunic, Jeong-bon Kim, ...
-
What Do We Learn from Two New Accounting-Based Stock Market Anomalies?
By Sudipta Basu
-
Do Private Company Targets that Hire Big 4 Auditors Receive Higher Proceeds?
By Gus De Franco, Ilanit Gavious, ...
-
By Gavin Cassar, Ken Cavalluzzo, ...
-
Selective Auditor Rotation and Earnings Management: Evidence from Korea
By Jeong-bon Kim, Chung-ki Min, ...