The Value of Financial Statement Verification in Debt Financing: Evidence from Private US Firms

• 成果类型: Article
• 署名作者: Minnis, Michael
• 署名单位: University of Chicago
• 刊物名称: JOURNAL OF ACCOUNTING RESEARCH
• ISSN/ISSBN: 0021-8456
• DOI: 10.1111/j.1475-679X.2011.00411.x
• 发表日期: 2011
• 页码: 457-506
• 关键词: auditor quality; INFORMATION; MARKETS; accruals; demand; equity; COSTS; incentives; CONTRACTS; benefits

摘要

I examine how verification of financial statements influences debt pricing. I use a large proprietary database of privately held U.S. firms, an important business sector in which the information environment is opaque and financial statement audits are not mandated. I find that audited firms have a significantly lower cost of debt and that lenders place more weight on audited financial information in setting the interest rate. Further, I provide evidence of a mechanism for this increased financial statement usefulness: accruals from audited financial statements are better predictors of future cash flows. Collectively, I provide novel evidence that audited financial statements are more informative and that this significantly influences lenders' decisions.