--- _id: '37136' abstract: - lang: eng text: This study examines the relation between voluntary audit and the cost of debt in private firms. We use a sample of 4,058 small private firms operating in the period 2006‐2017 that are not subject to mandatory audits. Firms decide for a voluntary audit of financial statements either because the economic setting in which they operate effectively forces them to do so (e.g., ownership complexity, export‐oriented supply chain, subsidiary status) or because firm fundamentals and/or financial reporting practices limit their access to financial debt, both reflected in earnings quality. We use these factors to model the decision for voluntary audit. In the outcome analyses, we find robust evidence that voluntary audits are associated with higher, rather than lower, interest rate by up to 3.0 percentage points. This effect is present regardless of the perceived audit quality (Big‐4 vs. non‐Big‐4), but is stronger for non‐Big‐4 audits where auditees have a stronger position relative to auditors. Audited firms’ earnings are less informative about future operating performance relative to unaudited counterparts. We conclude that voluntary audits facilitate access to financial debt for firms with higher risk that may otherwise have no access to this form of financing. The price paid is reflected in higher interest rates charged to firms with voluntary audits – firms with higher information and/or fundamental risk. author: - first_name: Riste full_name: Ichev, Riste last_name: Ichev - first_name: Jernej full_name: Koren, Jernej last_name: Koren - first_name: Urska full_name: Kosi, Urska id: '54068' last_name: Kosi - first_name: Katarina full_name: Sitar Sustar, Katarina last_name: Sitar Sustar - first_name: Aljosa full_name: Valentincic, Aljosa last_name: Valentincic citation: ama: 'Ichev R, Koren J, Kosi U, Sitar Sustar K, Valentincic A. Cost of Debt for Private Firms Revisited: Voluntary Audits as a Reflection of Risk.; 2021.' apa: 'Ichev, R., Koren, J., Kosi, U., Sitar Sustar, K., & Valentincic, A. (2021). Cost of Debt for Private Firms Revisited: Voluntary Audits as a Reflection of Risk.' bibtex: '@book{Ichev_Koren_Kosi_Sitar Sustar_Valentincic_2021, title={Cost of Debt for Private Firms Revisited: Voluntary Audits as a Reflection of Risk}, author={Ichev, Riste and Koren, Jernej and Kosi, Urska and Sitar Sustar, Katarina and Valentincic, Aljosa}, year={2021} }' chicago: 'Ichev, Riste, Jernej Koren, Urska Kosi, Katarina Sitar Sustar, and Aljosa Valentincic. Cost of Debt for Private Firms Revisited: Voluntary Audits as a Reflection of Risk, 2021.' ieee: 'R. Ichev, J. Koren, U. Kosi, K. Sitar Sustar, and A. Valentincic, Cost of Debt for Private Firms Revisited: Voluntary Audits as a Reflection of Risk. 2021.' mla: 'Ichev, Riste, et al. Cost of Debt for Private Firms Revisited: Voluntary Audits as a Reflection of Risk. 2021.' short: 'R. Ichev, J. Koren, U. Kosi, K. Sitar Sustar, A. Valentincic, Cost of Debt for Private Firms Revisited: Voluntary Audits as a Reflection of Risk, 2021.' date_created: 2023-01-17T15:03:08Z date_updated: 2023-01-18T13:40:40Z department: - _id: '635' - _id: '186' - _id: '551' keyword: - private firms - voluntary audit - cost of debt - self‐selection bias - risk language: - iso: eng main_file_link: - url: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3853927 status: public title: 'Cost of Debt for Private Firms Revisited: Voluntary Audits as a Reflection of Risk' type: working_paper user_id: '88603' year: '2021' ... --- _id: '3542' abstract: - lang: eng text: "We study the historical development of Slovenian Accounting Standards (SAS) and their association with accounting quality (AQ). We focus on private firms where the financial reporting process is characterised by low demand for high-quality reporting. We investigate three distinct editions of SAS since 1994 and test how their development towards international standards is related to AQ. Aggregate earnings management measures indicate that the use of accounting discretion decreases with less earnings smoothing over time. The main features of AQ have been consistent throughout historical development. Asymmetric timeliness of earnings, the ability of earnings to predict future cash flows, and the ability of accruals to mitigate mismatching are all present throughout. We also document typical departures from properties of high AQ. For example, accruals do not (always) facilitate timely recognition of losses. However, these can be attributed to the overwhelming influence of reporting incentives (e.g. taxation, debt, size) rather than to the (lower) quality of accounting standards.\r\n\r\n\r\n \r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n \r\n\r\n\r\n\r\n Full Article \r\n  Figures & data \r\n References \r\n  Citations \r\n \r\n Metrics \r\n  Reprints & Permissions \r\n  PDF \r\n \r\n \r\n\r\n\r\n\r\n\r\nAbstract\r\n\r\n\r\nWe study the historical development of Slovenian Accounting Standards (SAS) and their association with accounting quality (AQ). We focus on private firms where the financial reporting process is characterised by low demand for high-quality reporting. We investigate three distinct editions of SAS since 1994 and test how their development towards international standards is related to AQ. Aggregate earnings management measures indicate that the use of accounting discretion decreases with less earnings smoothing over time. The main features of AQ have been consistent throughout historical development. Asymmetric timeliness of earnings, the ability of earnings to predict future cash flows, and the ability of accruals to mitigate mismatching are all present throughout. We also document typical departures from properties of high AQ. For example, accruals do not (always) facilitate timely recognition of losses. However, these can be attributed to the overwhelming influence of reporting incentives (e.g. taxation, debt, size) rather than to the (lower) quality of accounting standards." author: - first_name: Aljosa full_name: Valentincic, Aljosa last_name: Valentincic - first_name: Ales full_name: Novak, Ales last_name: Novak - first_name: Urska full_name: Kosi, Urska id: '54068' last_name: Kosi citation: ama: Valentincic A, Novak A, Kosi U. Accounting quality in private firms during the transition towards international standards. Accounting in Europe. 2017;14(3):358-387. doi:10.1080/17449480.2017.1378821 apa: Valentincic, A., Novak, A., & Kosi, U. (2017). Accounting quality in private firms during the transition towards international standards. Accounting in Europe, 14(3), 358–387. https://doi.org/10.1080/17449480.2017.1378821 bibtex: '@article{Valentincic_Novak_Kosi_2017, title={Accounting quality in private firms during the transition towards international standards}, volume={14}, DOI={10.1080/17449480.2017.1378821}, number={3}, journal={Accounting in Europe}, author={Valentincic, Aljosa and Novak, Ales and Kosi, Urska}, year={2017}, pages={358–387} }' chicago: 'Valentincic, Aljosa, Ales Novak, and Urska Kosi. “Accounting Quality in Private Firms during the Transition towards International Standards.” Accounting in Europe 14, no. 3 (2017): 358–87. https://doi.org/10.1080/17449480.2017.1378821.' ieee: 'A. Valentincic, A. Novak, and U. Kosi, “Accounting quality in private firms during the transition towards international standards,” Accounting in Europe, vol. 14, no. 3, pp. 358–387, 2017, doi: 10.1080/17449480.2017.1378821.' mla: Valentincic, Aljosa, et al. “Accounting Quality in Private Firms during the Transition towards International Standards.” Accounting in Europe, vol. 14, no. 3, 2017, pp. 358–87, doi:10.1080/17449480.2017.1378821. short: A. Valentincic, A. Novak, U. Kosi, Accounting in Europe 14 (2017) 358–387. date_created: 2018-07-11T08:57:03Z date_updated: 2023-01-24T15:34:31Z department: - _id: '551' - _id: '635' - _id: '186' doi: 10.1080/17449480.2017.1378821 intvolume: ' 14' issue: '3' jel: - M41 - C23 - L21 - P20 keyword: - private firms - accounting quality - development of accounting standards - IFRS-like standards - Slovenia language: - iso: eng page: 358-387 publication: Accounting in Europe publication_status: published status: public title: Accounting quality in private firms during the transition towards international standards type: journal_article user_id: '54068' volume: 14 year: '2017' ... --- _id: '37109' abstract: - lang: eng text: 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: - first_name: Urska full_name: Kosi, Urska id: '54068' last_name: Kosi - first_name: Jerney full_name: Koren, Jerney last_name: Koren - first_name: Aljosa full_name: Valentincic, Aljosa last_name: Valentincic citation: ama: 'Kosi U, Koren J, Valentincic A. Does Financial Statement Audit Reduce the Cost of Debt of Private Firms? In: ; 2013.' apa: Kosi, U., Koren, J., & Valentincic, A. (2013). Does Financial Statement Audit Reduce the Cost of Debt of Private Firms? 36th Annual Congress of European Accounting Association, Paris, France. bibtex: '@inproceedings{Kosi_Koren_Valentincic_2013, title={Does Financial Statement Audit Reduce the Cost of Debt of Private Firms?}, author={Kosi, Urska and Koren, Jerney and Valentincic, Aljosa}, year={2013} }' chicago: Kosi, Urska, Jerney Koren, and Aljosa Valentincic. “Does Financial Statement Audit Reduce the Cost of Debt of Private Firms?,” 2013. ieee: U. Kosi, J. Koren, and A. Valentincic, “Does Financial Statement Audit Reduce the Cost of Debt of Private Firms?,” presented at the 36th Annual Congress of European Accounting Association, Paris, France, 2013. mla: Kosi, Urska, et al. Does Financial Statement Audit Reduce the Cost of Debt of Private Firms? 2013. short: 'U. Kosi, J. Koren, A. Valentincic, in: 2013.' conference: end_date: 2013-05-05 location: Paris, France name: 36th Annual Congress of European Accounting Association start_date: 2013-05-02 date_created: 2023-01-17T13:25:30Z date_updated: 2023-01-17T13:51:24Z department: - _id: '635' - _id: '186' - _id: '551' extern: '1' keyword: - private firms - voluntary audit - cost of debt - self-selection bias - lemon problem language: - iso: eng main_file_link: - url: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2373987 status: public title: Does Financial Statement Audit Reduce the Cost of Debt of Private Firms? type: conference user_id: '88603' year: '2013' ...