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Being private, Big 4 auditors, and debt raising

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  • Wen Hua Sharpe
  • Peter Carey
  • Hong Feng Zhang

Abstract

This study investigates the role of auditor choice (Big 4/Non‐Big 4) in debt financing for private and public firms. We find private firms have less access to debt than public firms, and Big 4 auditors support debt raising in both private and public firms. Consistent with private firms facing greater information asymmetry, Big 4 auditors are more important for debt raising in private firms than in public firms. The benefit of appointing Big 4 auditors for private firms' debt raising is greater in the opaque information environment of the global financial crisis. It is also greater when firms are smaller, younger, or have poorer financial reporting quality. We also find evidence consistent with Big 4 auditors mitigating agency conflicts and enhancing debt raising when ownership concentration is higher in private firms.

Suggested Citation

  • Wen Hua Sharpe & Peter Carey & Hong Feng Zhang, 2023. "Being private, Big 4 auditors, and debt raising," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(2), pages 2295-2345, June.
    • Handle: RePEc:bla:acctfi:v:63:y:2023:i:2:p:2295-2345
    DOI: 10.1111/acfi.12969
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    References listed on IDEAS

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