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| Author: | Pittman, J.A. Fortin, S. |
| Title: | Auditor choice and the cost of debt capital for newly public firms |
| Journal: | Journal of Accounting & Economics
2004 : FEB, VOL. 37:1, p. 113-136 |
| Index terms: | Accounting Auditors Quality Debt Pricing Debt financing Companies USA |
| Language: | eng |
| Abstract: | This study examines the impact of auditor choice on debt pricing in firms' early public years when they are lesser known. The evidence suggests that retaining a Big Six auditor, which can reduce debt-monitoring costs by enhancing the credibility of financial statements, enables young firms to lower their borrowing costs. Extant research implies that information asymmetry btw. borrowers and lenders is decreasing in firm age. There is also evidence provided consistent with the study's predictions that choosing a Big Six auditor affects firms' interest rates less over time and particularly benefits firms with short private histories. |
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