Real effects of the audit choice

• 成果类型: Article
• 署名作者: Kausar, Asad; Shroff, Nemit; White, Hal
• 署名单位: Nanyang Technological University; Massachusetts Institute of Technology (MIT); Pennsylvania Commonwealth System of Higher Education (PCSHE); Pennsylvania State University; Pennsylvania State University - University Park
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101
• DOI: 10.1016/j.jacceco.2015.10.001
• 发表日期: 2016
• 关键词: INVESTMENT DECISIONS; constraints; INFORMATION; MARKET; environment; selection; demand; FIRMS

摘要

We hypothesize that the choice to obtain a financial statement audit provides external financiers with incremental information about the firm, which helps reduce information asymmetry and financing frictions. Using a natural experiment, we show that when external financiers observe a firm's choice to voluntarily obtain an audit, the firms obtaining an audit significantly increase their debt, investment, and operating performance, and become more responsive to their investment opportunities. Further, we find that these effects are stronger for firms that are financially constrained and weaker for firms with other means to reduce financing frictions. Overall, our evidence suggests that the audit choice conveys information to capital providers, which reduces financing frictions and improves performance. (C) 2015 Elsevier B.V. All rights reserved.