Cost of debt for private firms revisited: voluntary audits as a reflection of risk

article Cost of debt for private firms revisited: voluntary audits as a reflection of risk published Riste Ichev author Jernej Koren author Urska Kosi author Katarina Sitar Sustar author Aljosa Valentincic author 186 department 551 department 635 department We examine the relation between voluntary audit and the cost of debt in private firms. We use a sample of 7420 small private firms operating in the period 2006-2022 that are not subject to mandatory audits. Firms self-select into voluntary audits because of the economic setting (e.g., ownership complexity, export, subsidiary status) or because firm fundamentals limit their access to financial debt. In the outcome analyses, we find that voluntary audits result in higher, rather than lower, interest rates with increases ranging from approximately 1.7 percentage points, but going higher depending on the exact specification. This effect is present regardless of the perceived audit quality (Big-4 vs. non-Big-4), consistent across auditor types. Audited firms’ earnings are less informative about future operating performance. Voluntary audits facilitate access to financial debt for high-risk firms. The price paid is reflected in higher interest rates for voluntary audits – firms with higher information/fundamental risk. Elsevier 2026 eng International Review of Economics & Finance 1059-056010.1016/j.iref.2026.105474 109 @article{Ichev_Koren_Kosi_Sitar Sustar_Valentincic_2026, title={Cost of debt for private firms revisited: voluntary audits as a reflection of risk}, volume={109}, DOI={<a href="https://doi.org/10.1016/j.iref.2026.105474">10.1016/j.iref.2026.105474</a>}, number={105474}, journal={International Review of Economics & Finance}, publisher={Elsevier }, author={Ichev, Riste and Koren, Jernej and Kosi, Urska and Sitar Sustar, Katarina and Valentincic, Aljosa}, year={2026} } 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. International Review of Economics & Finance. 2026;109. doi:<a href="https://doi.org/10.1016/j.iref.2026.105474">10.1016/j.iref.2026.105474</a> Ichev, Riste, et al. “Cost of Debt for Private Firms Revisited: Voluntary Audits as a Reflection of Risk.” International Review of Economics & Finance, vol. 109, 105474, Elsevier , 2026, doi:<a href="https://doi.org/10.1016/j.iref.2026.105474">10.1016/j.iref.2026.105474</a>. R. Ichev, J. Koren, U. Kosi, K. Sitar Sustar, A. Valentincic, International Review of Economics & Finance 109 (2026). 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.” International Review of Economics & Finance 109 (2026). <a href="https://doi.org/10.1016/j.iref.2026.105474">https://doi.org/10.1016/j.iref.2026.105474</a>. 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,” International Review of Economics & Finance, vol. 109, Art. no. 105474, 2026, doi: <a href="https://doi.org/10.1016/j.iref.2026.105474">10.1016/j.iref.2026.105474</a>. Ichev, R., Koren, J., Kosi, U., Sitar Sustar, K., & Valentincic, A. (2026). Cost of debt for private firms revisited: voluntary audits as a reflection of risk. International Review of Economics & Finance, 109, Article 105474. <a href="https://doi.org/10.1016/j.iref.2026.105474">https://doi.org/10.1016/j.iref.2026.105474</a> 658942026-06-15T10:26:04Z2026-06-22T11:37:47Z