Investor Protection, Firm Informational Problems, Big N Auditors, and Cost of Debt around the World

Ferdinand A. Gul, Gaoguang (Stephen) Zhou, Xindong (Kevin) Zhu

Research output: Contribution to journalArticlepeer-review

Abstract

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.
Original languageEnglish
Pages (from-to)1–30
Number of pages30
JournalAuditing
Volume32
Issue number3
DOIs
Publication statusPublished - Aug 2013

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