Affiliation:
1. Ferdinand A. Gul is a Professor at Monash University, Gaoguang (Stephen) Zhou is a Post-Doctoral Fellow at Hong Kong Polytechnic University, and Xindong (Kevin) Zhu is an Assistant Professor at City University of Hong Kong.
Abstract
SUMMARY:
This paper examines the effects of investor protection, firm informational problems (proxied by firm size, firm age, and the number of analysts following), and Big N auditors on firms' cost of debt around the world. Using data from 1994 to 2006 and over 90,000 firm-year observations, we find that the cost of debt is lower when firms are audited by Big N auditors, especially in countries with strong investor protection. Second, we find that firms with more informational problems (i.e., higher information asymmetry problems) benefit more from Big N auditors in terms of lower cost of debt only in countries with stronger investor protection.
JEL Classifications: G14; G15; G32; K22; M42.
Publisher
American Accounting Association
Subject
Economics and Econometrics,Finance,Accounting
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