The influence of auditor choice on cost of debt capital for listed companies
1University of Oulu, Oulu Business School, Department of Accounting, Accounting
|Online Access:||PDF Full Text (PDF, 1.2 MB)|
|Persistent link:|| http://urn.fi/URN:NBN:fi:oulu-201306061552
|Publish Date:|| 2013-06-14
|Thesis type:||Master's thesis
Purpose: This study aims to examine the impact of auditor choice on debt pricing for listed companies by using the samples of listed companies in U.S. In this paper, Big 4 audit firms are considered to be “high-quality” auditors and consequently they provide a higher perceived and actual audit quality.
Design: The influence of auditor choice on cost of debt capital for listed companies is investigated by the differences in companies’ interest expenses when they hire Big 4/ non-Big 4 auditors.
Data: The sample is selected from all listed firms in United States. The data combines CRSP and COMPUSTAT databases and includes US listed companies from NYSE, AMEX, NASDAQ and ARCA EXCHANGE. The selected sample companies all have financial statements for six successive years from 2007 to 2011 and fiscal years with 12 months.
Findings: After controlling for other determinants of debt pricing, the results do not significantly support my hypothesis, as to say, the relationship between auditor choice and cost of debt capital cannot be drew in this paper.
Practical Implications: The relationship between auditor choice on Big 4/non-Big 4 and cost of debt capital is important when companies eager to find ways reducing their cost expenses. By hiring a higher quality auditor, the financial reports provided to outsiders will be more reliable and contain less information asymmetries. In that case, lenders will take less risk and thus, reduce the debt price.
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