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Does Auditor Quality and Tenure Matter to Investors? Evidence from the Bond Market

Journal of accounting research, 2004-09, Vol.42 (4), p.755-793 [Peer Reviewed Journal]

Copyright 2004 The Institute of Professional Accounting, University of Chicago ;Copyright Institute of Professional Accounting Sep 2004 ;ISSN: 0021-8456 ;EISSN: 1475-679X ;DOI: 10.1111/j.1475-679X.2004.00156.x ;CODEN: JACRBR

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Title:
Does Auditor Quality and Tenure Matter to Investors? Evidence from the Bond Market
Author: MANSI, SATTAR A. ; MAXWELL, WILLIAM F. ; MILLER, DARIUS P.
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
Is Part Of: Journal of accounting research, 2004-09, Vol.42 (4), p.755-793
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.
Publisher: Oxford, UK and Boston, USA: Blackwell Publishing, Inc
Language: English
Identifier: ISSN: 0021-8456
EISSN: 1475-679X
DOI: 10.1111/j.1475-679X.2004.00156.x
CODEN: JACRBR
Source: Alma/SFX Local Collection
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Does Auditor Quality and Tenure Matter to Investors? Evidence from the Bond Market

Copyright 2004 The Institute of Professional Accounting, University of Chicago ;Copyright Institute of Professional Accounting Sep 2004 ;ISSN: 0021-8456 ;EISSN: 1475-679X ;DOI: 10.1111/j.1475-679X.2004.00156.x ;CODEN: JACRBR

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