SYNOPSIS: We examine the relation between industry specialist auditors and cost-of-debt financing using a national and city level industry specialist framework. Consistent with the assumption that higher audit quality is associated with lower information risk, which benefits clients in raising debt capital, we find that firms audited by city level industry specialist auditors, either alone or jointly with national level industry specialist auditors, enjoy significantly lower cost-of-debt financing measured by both credit rating and bond spread. Our results suggest that, compared to clients of non-industry specialists, firms’ odds of worse credit ratings are 0.859 (0.664) times lower, and their bond spreads are 17 (16) basis points lower if they are clients of city-level-only (joint national and city level) industry specialists. In addition, our evidence shows that, for joint national and city level industry specialists, both information and insurance roles are significant to reduce cost-of-debt financing.
Skip Nav Destination
Close
Article navigation
1 September 2010
Research Article|
September 01 2010
National Level, City Level Auditor Industry Specialization and Cost of Debt
Accounting Horizons (2010) 24 (3): 395–417.
Citation
Chan Li, Yuan Xie, Jian Zhou; National Level, City Level Auditor Industry Specialization and Cost of Debt. Accounting Horizons 1 September 2010; 24 (3): 395–417. doi: https://doi.org/10.2308/acch.2010.24.3.395
Download citation file:
Close
Sign in
Don't already have an account? Register
Client Account
You could not be signed in. Please check your email address / username and password and try again.