@article{4035,
  abstract     = {{We examine whether the mandated introduction of International Financial Reporting Standards (IFRS) is associated with the propensity to access the public rather than private debt market and the cost of debt. We use a global sample of public bonds and private loans and find that mandatory IFRS adopters are more likely, post-IFRS, to issue bonds than to borrow privately. We also find that mandatory IFRS adopters pay lower bond yield spreads, but not lower loan spreads, after the mandate. These findings are consistent with debt providers responding positively to financial reporting of higher quality and comparability, but only when there is a greater reliance on publicly available financial statements than private communication. Lastly, we document that the observed debt market benefits are concentrated in countries with larger differences between domestic GAAP and IFRS and are present even for EU countries that did not experience concurrent financial reporting enforcement or other institutional reforms. Overall, our study documents positive economic consequences around the mandated IFRS adoption for corporate debt financing and, in particular, for bond financing.}},
  author       = {{Florou, Annita and Kosi, Urska}},
  issn         = {{1573-7136}},
  journal      = {{Review of Accounting Studies}},
  keywords     = {{Accounting regulation, IFRS, Accounting quality, Public and private debt markets, Cost of debt}},
  number       = {{4}},
  pages        = {{1407--1456}},
  title        = {{{Does mandatory IFRS adoption facilitate debt financing?}}},
  doi          = {{10.1007/s11142-015-9325-z}},
  volume       = {{20}},
  year         = {{2015}},
}

@inproceedings{37109,
  abstract     = {{This study examines the effect of audit on private firms’ cost of debt. We use a sample of 1,949 small private firms operating in the period 2006-2010 with optional financial statement audit. High quality data allows us to construct a more precise interest rate measure than existing studies employ. After controlling for obvious sources of demand for voluntary audits (ownership complexity, subsidiary status, bank relations), we find a robust central result that voluntary audits increase rather than decrease the cost of debt financing, contrary to several existing studies. This finding indicates that voluntary audits are generally treated as “adopting a label” and penalised by creditors, regardless of the perceived auditor quality as a result of the lemon problem in the audit market. Even Big-4 audits increase the cost of debt, likely as a result due to the lemon problem in the audit market, although the increase is smaller than for non-Big-4 audits. The results are sensitive to the estimation method used (OLS, Heckman’s two-step, PSM) and (sub-)sample selection. We show that disregarding the underlying assumptions of these estimation methods may lead to incorrect inferences. Additional analyses show that audited firms’ reported earnings are less informative about future operating performance than earnings of their unaudited counterparts. Our results also indicate that results are sensitive to cost of debt definition and this might have affected the results reported in the existing literature.}},
  author       = {{Kosi, Urska and Koren, Jerney and Valentincic, Aljosa}},
  keywords     = {{private firms, voluntary audit, cost of debt, self-selection bias, lemon problem}},
  location     = {{Paris, France}},
  title        = {{{Does Financial Statement Audit Reduce the Cost of Debt of Private Firms?}}},
  year         = {{2013}},
}