The Value of Financial Statement Verification in Debt Financing: Evidencefrom Private U.S. Firms.

Audit;Verification;Debt;Financing;Private Firm;Economics;Business;Business Administration

Minnis, Michael CraigNagar, Venkatesh K. ;

University of Michigan

关键词: Audit;    Verification;    Debt;    Financing;    Private Firm;    Economics;    Business;    Business Administration;   

Others  :  https://deepblue.lib.umich.edu/bitstream/handle/2027.42/77814/minnis_1.pdf?sequence=1&isAllowed=y

瑞士|英语

来源: The Illinois Digital Environment for Access to Learning and Scholarship

【 摘 要 】

I examine how the verification of financial statements influences lenders’ debt pricing decisions.To do so, I obtain access to a large proprietary database of privately-held U.S. firms, an important business sector in which the information environment is opaque and financial statement audits are not mandated. I find not only that audited firms have a significantly lower cost of debt, but also that lenders place significantly more weight on audited, compared to unaudited, financial information in setting the interest rate. Further, I provide evidence of a mechanism for this increased financial statement usefulness: accruals from audited financial statements are better predictors of future cash flows. Collectively, I provide novel evidence that audited financial statements are more informative and that this significantly influences lenders’ decisions.