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Investor Protection, Firm Informational Problems, Big N Auditors, and Cost of Debt around the World

Year: 2013

Type: article

Abstract: SUMMARY: This paper examines the effects of investor protection, firm informational problems (proxied by firm size, firm age, and the number of analysts following), and Big N auditors on firms' cost of debt around the world. Using data from 1994 to 2006 and over 90,000 firm-year observations, we find that the cost of debt is lower when firms are audited by Big N auditors, especially in countries with strong investor protection. Second, we find that firms with more informational problems (i.e., higher information asymmetry problems) benefit more from Big N auditors in terms of lower cost of debt only in countries with stronger investor protection. JEL Classifications: G14; G15; G32; K22; M42.

Source: Auditing A Journal of Practice & Theory

DOI: 10.2308/ajpt-50462

Authors: Ferdinand A. Gul, Gaoguang (Stephen Zhou, Xindong (Kevin Zhu

Institutions: Hong Kong Polytechnic University, City University of Hong Kong, Monash University

Language: English

Topic: Auditing, Earnings Management, Governance

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W2171966748

FWCI: 19.4

Cites: 69

Cited by: 119

Related to: 10