Does Auditor Quality and Tenure Matter to Investors? Evidence from the Bond Market
We examine the relation between auditor characteristics (quality and tenure) and the cost of debt financing. Consistent with the hypothesis that audit characteristics are important to the capital markets, we find that (1) auditor quality and tenure are negatively and significantly related to the cos...
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| Veröffentlicht in: | Journal of accounting research 2004-09, Vol.42 (4), p.755-793 |
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| container_title | Journal of accounting research |
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| creator | MANSI, SATTAR A. MAXWELL, WILLIAM F. MILLER, DARIUS P. |
| description | We examine the relation between auditor characteristics (quality and tenure) and the cost of debt financing. Consistent with the hypothesis that audit characteristics are important to the capital markets, we find that (1) auditor quality and tenure are negatively and significantly related to the cost of debt financing, (2) the relation between auditor characteristics and the cost of debt is most pronounced in firms with debt that is noninvestment grade, and (3) both the insurance and information role of audits are economically significant to the cost of debt. Overall, our results suggest that, through their dual roles of providing information and insurance, auditor quality and tenure matter to capital market participants. |
| doi_str_mv | 10.1111/j.1475-679X.2004.00156.x |
| format | Article |
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Evidence from the Bond Market</atitle><jtitle>Journal of accounting research</jtitle><date>2004-09</date><risdate>2004</risdate><volume>42</volume><issue>4</issue><spage>755</spage><epage>793</epage><pages>755-793</pages><issn>0021-8456</issn><eissn>1475-679X</eissn><coden>JACRBR</coden><abstract>We examine the relation between auditor characteristics (quality and tenure) and the cost of debt financing. Consistent with the hypothesis that audit characteristics are important to the capital markets, we find that (1) auditor quality and tenure are negatively and significantly related to the cost of debt financing, (2) the relation between auditor characteristics and the cost of debt is most pronounced in firms with debt that is noninvestment grade, and (3) both the insurance and information role of audits are economically significant to the cost of debt. 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| ispartof | Journal of accounting research, 2004-09, Vol.42 (4), p.755-793 |
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| language | eng |
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| source | Jstor Complete Legacy; RePEc; Wiley Online Library Journals Frontfile Complete |
| subjects | Accounting Accounting research Auditing Auditors Bond markets Bond rating Bonds Business accounting Business structures Corporate bonds Correlation analysis Credit ratings Debt Debt financing Financial audits Initial public offerings Investment Investors Quality Stock prices Studies Tenure Yield curves |
| title | Does Auditor Quality and Tenure Matter to Investors? Evidence from the Bond Market |
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