The importance of IRS monitoring to debt pricing in private firms

• 成果类型: Article
• 署名作者: Guedhami, Omrane; Pittman, Jeffrey
• 署名单位: Memorial University Newfoundland; University of South Carolina System; University of South Carolina Columbia
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2007.12.002
• 发表日期: 2008
• 页码: 38-58
• 关键词: CORPORATE GOVERNANCE; taxes; Agency costs of debt; Ownership structure

摘要

We examine the link between Internal Revenue Service (IRS) monitoring and yield spreads on private firms' 144A bond issues. After controlling for security-specific and other firm-specific determinants, we provide evidence that debt financing is cheaper when the probability of a face-to-face IRS audit is higher. Consistent with another prediction, we find that IRS oversight has a stronger impact on bond pricing for private firms with high ownership concentration, which suffer worse agency problems between controlling shareholders and outside investors. Collectively, our research implies that IRS monitoring plays a valuable corporate governance role by reducing information asymmetry evident in borrowing costs. (c) 2008 Elsevier B.V. All rights reserved.