IDEAS home Printed from https://ideas.repec.org/a/taf/acceur/v13y2016i1p21-42.html
   My bibliography  Save this article

Causes and Consequences of Improvements in the Information Environment for Swedish Small and Mid-Sized Firms

Author

Listed:
  • Mari Paananen
  • Annelies Renders
  • Marita Blomkvist

Abstract

We investigate improvements in the information environment and financing decisions for Swedish small and mid-sized firms. These firms are required to file audited annual reports. We create an index capturing accounting standards choices, auditor quality, and board size reflecting information environment improvements. We find an association between increased short-term financing and information environment improvements: The most common actions are to switch to a Big 4 auditor or a chartered accountant and to add independent board members as opposed to changing the accounting standards used. These improvements are associated with a switch to long-term debt and a reduction of cost of debt. Our findings are relevant for the ongoing discussion on accounting regulation for private firms both in the USA and Europe since they show that (Swedish) private firms use other ways to improve the information environment in order to access to less costly long-term bank debt besides adopting International Financial Reporting Standards.

Suggested Citation

  • Mari Paananen & Annelies Renders & Marita Blomkvist, 2016. "Causes and Consequences of Improvements in the Information Environment for Swedish Small and Mid-Sized Firms," Accounting in Europe, Taylor & Francis Journals, vol. 13(1), pages 21-42, April.
    • Handle: RePEc:taf:acceur:v:13:y:2016:i:1:p:21-42
    DOI: 10.1080/17449480.2016.1156240
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/17449480.2016.1156240
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/17449480.2016.1156240?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.

    References listed on IDEAS

    as
    1. Francis, Jennifer & LaFond, Ryan & Olsson, Per & Schipper, Katherine, 2005. "The market pricing of accruals quality," Journal of Accounting and Economics, Elsevier, vol. 39(2), pages 295-327, June.
    2. N. Berger, Allen & F. Udell, Gregory, 1998. "The economics of small business finance: The roles of private equity and debt markets in the financial growth cycle," Journal of Banking & Finance, Elsevier, vol. 22(6-8), pages 613-673, August.
    3. Mary E. Barth & Wayne R. Landsman & Mark H. Lang, 2008. "International Accounting Standards and Accounting Quality," Journal of Accounting Research, Wiley Blackwell, vol. 46(3), pages 467-498, June.
    4. Jeong†Bon Kim & Dan A. Simunic & Michael T. Stein & CHEONG H. YI, 2011. "Voluntary Audits and the Cost of Debt Capital for Privately Held Firms: Korean Evidence," Contemporary Accounting Research, John Wiley & Sons, vol. 28(2), pages 585-615, June.
    5. Pittman, Jeffrey A. & Fortin, Steve, 2004. "Auditor choice and the cost of debt capital for newly public firms," Journal of Accounting and Economics, Elsevier, vol. 37(1), pages 113-136, February.
    6. Sattar A. Mansi & William F. Maxwell & Darius P. Miller, 2004. "Does Auditor Quality and Tenure Matter to Investors? Evidence from the Bond Market," Journal of Accounting Research, Wiley Blackwell, vol. 42(4), pages 755-793, September.
    7. Sam Han & Tony Kang & Yong Keun Yoo, 2012. "Governance Role of Auditors and Legal Environment: Evidence from Corporate Disclosure Transparency," European Accounting Review, Taylor & Francis Journals, vol. 21(1), pages 29-50, May.
    8. Christopher Nobes, 2010. "On Researching into the Use of IFRS by Private Entities in Europe," Accounting in Europe, Taylor & Francis Journals, vol. 7(2), pages 213-226, December.
    9. Steve Fortin & Jeffrey A. Pittman, 2007. "The Role of Auditor Choice in Debt Pricing in Private Firms," Contemporary Accounting Research, John Wiley & Sons, vol. 24(3), pages 859-896, September.
    10. Ulf Br&?ggemann & J?rg-Markus Hitz & Thorsten Sellhorn, 2013. "Intended and Unintended Consequences of Mandatory IFRS Adoption: A Review of Extant Evidence and Suggestions for Future Research," European Accounting Review, Taylor & Francis Journals, vol. 22(1), pages 1-37, May.
    11. Linck, James S. & Netter, Jeffry M. & Yang, Tina, 2008. "The determinants of board structure," Journal of Financial Economics, Elsevier, vol. 87(2), pages 308-328, February.
    12. Ole-Kristian Hope & Wayne Thomas & Dushyantkumar Vyas, 2011. "Financial credibility, ownership, and financing constraints in private firms," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 42(7), pages 935-957, September.
    13. Jaggi, Bikki & Leung, Sidney & Gul, Ferdinand, 2009. "Family control, board independence and earnings management: Evidence based on Hong Kong firms," Journal of Accounting and Public Policy, Elsevier, vol. 28(4), pages 281-300, July.
    14. Ball, Ray & Shivakumar, Lakshmanan, 2005. "Earnings quality in UK private firms: comparative loss recognition timeliness," Journal of Accounting and Economics, Elsevier, vol. 39(1), pages 83-128, February.
    15. Ferrando, Annalisa & Mulier, Klaas, 2013. "Do firms use the trade credit channel to manage growth?," Journal of Banking & Finance, Elsevier, vol. 37(8), pages 3035-3046.
    16. Leuz, C & Verrecchia, RE, 2000. "The economic consequences of increased disclosure," Journal of Accounting Research, Wiley Blackwell, vol. 38, pages 91-124.
    17. Nancy Huyghebaert & Linda M. Van de Gucht, 2007. "The Determinants of Financial Structure: New Insights from Business Start‐ups," European Financial Management, European Financial Management Association, vol. 13(1), pages 101-133, January.
    18. Boone, Jeff P. & Khurana, Inder K. & Raman, K.K., 2010. "Do the Big 4 and the Second-tier firms provide audits of similar quality?," Journal of Accounting and Public Policy, Elsevier, vol. 29(4), pages 330-352, July.
    19. Steven M. Fazzari & R. Glenn Hubbard & Bruce C. Petersen, 1988. "Financing Constraints and Corporate Investment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(1), pages 141-206.
    20. Holthausen, Robert W. & Leftwich, Richard W., 1983. "The economic consequences of accounting choice implications of costly contracting and monitoring," Journal of Accounting and Economics, Elsevier, vol. 5(1), pages 77-117, April.
    21. Axel Haller, 2002. "Financial accounting developments in the European Union: past events and future prospects," European Accounting Review, Taylor & Francis Journals, vol. 11(1), pages 153-190.
    22. Maffett, Mark, 2012. "Financial reporting opacity and informed trading by international institutional investors," Journal of Accounting and Economics, Elsevier, vol. 54(2), pages 201-220.
    23. K. Van Hulle, 1992. "Harmonization of accounting standards A view from the European community," European Accounting Review, Taylor & Francis Journals, vol. 1(1), pages 161-172.
    24. Christof Beuselinck & Marc Deloof & Sophie Manigart, 2009. "Private Equity Involvement and Earnings Quality," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 36(5‐6), pages 587-615, June.
    25. Rajan, Raghuram G, 1992. "Insiders and Outsiders: The Choice between Informed and Arm's-Length Debt," Journal of Finance, American Finance Association, vol. 47(4), pages 1367-1400, September.
    26. Armstrong, Christopher S. & Guay, Wayne R. & Weber, Joseph P., 2010. "The role of information and financial reporting in corporate governance and debt contracting," Journal of Accounting and Economics, Elsevier, vol. 50(2-3), pages 179-234, December.
    27. Beck, Thorsten & Demirguc-Kunt, Asli, 2006. "Small and medium-size enterprises: Access to finance as a growth constraint," Journal of Banking & Finance, Elsevier, vol. 30(11), pages 2931-2943, November.
    28. Anderson, Ronald C. & Mansi, Sattar A. & Reeb, David M., 2004. "Board characteristics, accounting report integrity, and the cost of debt," Journal of Accounting and Economics, Elsevier, vol. 37(3), pages 315-342, September.
    29. Davila, Tony, 2005. "An exploratory study on the emergence of management control systems: formalizing human resources in small growing firms," Accounting, Organizations and Society, Elsevier, vol. 30(3), pages 223-248, April.
    30. Christof Beuselinck & Marc Deloof & Sophie Manigart, 2009. "Private Equity Involvement and Earnings Quality," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 36(5‐6), pages 587-615, June.
    31. Diamond, Douglas W & Verrecchia, Robert E, 1991. "Disclosure, Liquidity, and the Cost of Capital," Journal of Finance, American Finance Association, vol. 46(4), pages 1325-1359, September.
    32. Martin Glaum & Jörg Baetge & Alexander Grothe & Tatjana Oberdörster, 2013. "Introduction of International Accounting Standards, Disclosure Quality and Accuracy of Analysts' Earnings Forecasts," European Accounting Review, Taylor & Francis Journals, vol. 22(1), pages 79-116, May.
    33. Hans B. Christensen & Edward Lee & Martin Walker, 2009. "Do IFRS Reconciliations Convey Information? The Effect of Debt Contracting," Journal of Accounting Research, Wiley Blackwell, vol. 47(5), pages 1167-1199, December.
    34. Petersen, Mitchell A & Rajan, Raghuram G, 1994. "The Benefits of Lending Relationships: Evidence from Small Business Data," Journal of Finance, American Finance Association, vol. 49(1), pages 3-37, March.
    35. Benjamin S. Wilner, 2000. "The Exploitation of Relationships in Financial Distress: The Case of Trade Credit," Journal of Finance, American Finance Association, vol. 55(1), pages 153-178, February.
    36. Chua, Jess H. & Chrisman, James J. & Kellermanns, Franz & Wu, Zhenyu, 2011. "Family involvement and new venture debt financing," Journal of Business Venturing, Elsevier, vol. 26(4), pages 472-488, July.
    Full references (including those not matched with items on IDEAS)

    Citations

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


    Cited by:

    1. Dominika Hadro & Karol Marek Klimczak & Marek Pauka, 2017. "Impression Management in Letters to Shareholders: Evidence from Poland," Accounting in Europe, Taylor & Francis Journals, vol. 14(3), pages 305-330, September.
    2. Stefanie Ceustermans & Diane Breesch & Joël Branson, 2017. "Voluntary Disclosure of Sales and the Extent of Trade Credit in Small Private Companies," Accounting in Europe, Taylor & Francis Journals, vol. 14(3), pages 388-406, September.
    3. Farah Saerens & Stefanie Ceustermans, 2021. "Abbreviated or Micro-Entity Accounts? Effect of Financial Reporting Format on the Availability of Trade Credit," Sustainability, MDPI, vol. 13(15), pages 1-18, July.
    4. Wan Nordin Wan-Hussin & Ameen Qasem & Norhani Aripin & Mohd Shazwan Mohd Ariffin, 2021. "Corporate Responsibility Disclosure, Information Environment and Analysts’ Recommendations: Evidence from Malaysia," Sustainability, MDPI, vol. 13(6), pages 1-27, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Chan, Ann L.-C. & Hsu, Audrey W.-H. & Lee, Edward, 2015. "Mandatory adoption of IFRS and timely loss recognition across Europe: The effect of corporate finance incentives," International Review of Financial Analysis, Elsevier, vol. 38(C), pages 70-82.
    2. Armstrong, Christopher S. & Guay, Wayne R. & Weber, Joseph P., 2010. "The role of information and financial reporting in corporate governance and debt contracting," Journal of Accounting and Economics, Elsevier, vol. 50(2-3), pages 179-234, December.
    3. Michael Minnis, 2011. "The Value of Financial Statement Verification in Debt Financing: Evidence from Private U.S. Firms," Journal of Accounting Research, Wiley Blackwell, vol. 49(2), pages 457-506, May.
    4. Bertrand, Jérémie & de Brebisson, Hélène & Burietz, Aurore, 2021. "Why choosing IFRS? Benefits of voluntary adoption by European private companies," International Review of Law and Economics, Elsevier, vol. 65(C).
    5. Chen Chen & Michelle Song & Cameron Truong & Jin Zhang, 2024. "Naming as business strategy: an analysis of eponymy and debt contracting," Review of Accounting Studies, Springer, vol. 29(3), pages 2971-3017, September.
    6. De George, Emmanuel T. & Li, Xi & Shivakumar, Lakshmanan, 2016. "A review of the IFRS adoption literature," LSE Research Online Documents on Economics 67599, London School of Economics and Political Science, LSE Library.
    7. Christian Leuz & Peter D. Wysocki, 2016. "The Economics of Disclosure and Financial Reporting Regulation: Evidence and Suggestions for Future Research," Journal of Accounting Research, Wiley Blackwell, vol. 54(2), pages 525-622, May.
    8. Emmanuel T. De George & Xi Li & Lakshmanan Shivakumar, 2016. "A review of the IFRS adoption literature," Review of Accounting Studies, Springer, vol. 21(3), pages 898-1004, September.
    9. Stefanie Ceustermans & Diane Breesch & Joël Branson, 2017. "Voluntary Disclosure of Sales and the Extent of Trade Credit in Small Private Companies," Accounting in Europe, Taylor & Francis Journals, vol. 14(3), pages 388-406, September.
    10. Persakis, Anthony & Iatridis, George Emmanuel, 2015. "Cost of capital, audit and earnings quality under financial crisis: A global empirical investigation," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 38(C), pages 3-24.
    11. Liangbo Ma & Shiguang Ma & Gary Tian, 2017. "Corporate Opacity and Cost of Debt for Family Firms," European Accounting Review, Taylor & Francis Journals, vol. 26(1), pages 27-59, January.
    12. Arun Upadhyay, 2014. "Social Concentration on Boards, Corporate Information Environment and Cost of Capital," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 41(7-8), pages 974-1001, September.
    13. Ann Vanstraelen & Caren Schelleman, 2017. "Auditing private companies: what do we know?," Accounting and Business Research, Taylor & Francis Journals, vol. 47(5), pages 565-584, July.
    14. Heidi Vander Bauwhede & Michiel De Meyere & Philippe Van Cauwenberge, 2015. "Financial reporting quality and the cost of debt of SMEs," Small Business Economics, Springer, vol. 45(1), pages 149-164, June.
    15. Michel Magnan & Haiping Wang & Yaqi Shi(Sans nom), 2016. "Fair Value Accounting and the Cost of Debt," CIRANO Working Papers 2016s-32, CIRANO.
    16. Yu Gao, 2011. "The Sarbanes‐Oxley Act and the Choice of Bond Market by Foreign Firms," Journal of Accounting Research, Wiley Blackwell, vol. 49(4), pages 933-968, September.
    17. Alexandra Moritz & Joern H. Block & Andreas Heinz, 2016. "Financing patterns of European SMEs -- an empirical taxonomy," Venture Capital, Taylor & Francis Journals, vol. 18(2), pages 115-148, April.
    18. Jeong-Bon Kim & Mikhail Pevzner & Xiangang Xin, 2019. "Foreign institutional ownership and auditor choice: Evidence from worldwide institutional ownership," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 50(1), pages 83-110, February.
    19. Aase, Øivind André Strand, 2022. "Effects of Voluntary Audit on Accounting Quality in Small Private Firms," Discussion Papers 2022/1, Norwegian School of Economics, Department of Business and Management Science.
    20. Jeong-Bon Kim & Byron Song & Judy Tsui, 2013. "Auditor size, tenure, and bank loan pricing," Review of Quantitative Finance and Accounting, Springer, vol. 40(1), pages 75-99, January.

    More about this item

    Statistics

    Access and download statistics

    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:taf:acceur:v:13:y:2016:i:1:p:21-42. 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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/RAIE20 .

    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.