IDEAS home Printed from https://ideas.repec.org/a/eme/majpps/maj-07-2015-1230.html
   My bibliography  Save this article

Does auditor industry expertise affect bank loan costs?

Author

Listed:
  • Yinghong Zhang
  • Fang Sun
  • Chunwei Xian

Abstract

Purpose - This paper aims to examine whether firms retaining industry-specialist auditors receive better price and non-price terms for bank loans. Design/methodology/approach - Based on a sample of companies retaining big N auditors during the 2000-2010 period, this paper constructed six proxies for auditor industry expertise and tested three major loan terms: loan spreads, number of general and financial covenants and requirements for collateral. Findings - It was found that companies retaining industry-specialist auditors receive lower interest rates and fewer covenants. Banks are also less likely to demand secured collateral. These findings are supported by several sensitivity tests. Research limitations/implications - The findings suggest that auditor industry expertise provides incremental value to creditors and that bank loan cost is one economic benefit for companies hiring specialist auditors. Originality/value - To the best of the authors’ knowledge, this study is the first to investigate the impact of auditor industry expertise on the cost of private debts.

Suggested Citation

  • Yinghong Zhang & Fang Sun & Chunwei Xian, 2017. "Does auditor industry expertise affect bank loan costs?," Managerial Auditing Journal, Emerald Group Publishing Limited, vol. 32(3), pages 295-324, March.
    • Handle: RePEc:eme:majpps:maj-07-2015-1230
    DOI: 10.1108/MAJ-07-2015-1230
    as

    Download full text from publisher

    File URL: https://www.emerald.com/insight/content/doi/10.1108/MAJ-07-2015-1230/full/html?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://www.emerald.com/insight/content/doi/10.1108/MAJ-07-2015-1230/full/pdf?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1108/MAJ-07-2015-1230?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Arnold Schneider, 2021. "Does knowledge about a borrowing firm’s internal audit influence bank lending decisions?," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 18(3), pages 304-314, September.
    2. Schneider, Arnold, 2018. "Studies on the impact of accounting information and assurance on commercial lending judgments," Journal of Accounting Literature, Elsevier, vol. 41(C), pages 63-74.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eme:majpps:maj-07-2015-1230. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Emerald Support (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.