Voluntary audits and the cost of debt capital for privately held firms: Korean evidence

Contemporary Accounting Research

Volumn 28, Issue 2, 2011, Pages 585-615

  Kim, Jeong Bon ^a   Simunic, Dan A ^b   Stein, Michael T ^c   Yi, Cheong H ^d  

^a CITY UNIVERSITY OF HONG KONG   (Hong Kong)

^b UNIVERSITY OF BRITISH COLUMBIA   (Canada)

^c OLD DOMINION UNIVERSITY   (United States)

^d HONG KONG POLYTECHNIC UNIVERSITY   (Hong Kong)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 79952357374     PISSN: 08239150     EISSN: 19113846     Source Type: Journal    
DOI: 10.1111/j.1911-3846.2010.01054.x     Document Type: Article

References (60)

1. Ang, J. S., R. A. Cole, and J. W. Lin. 2000. Agency costs and ownership structure. The Journal of Finance 55 (1): 81-106.
2. Atanasov, V., B. Black, C. Ciccotello, and S. Gyoshev. 2010. How does law affect finance? An examination of equity tunneling in Bulgaria Journal of Financial Economics 96 (1): 155-73.
3. Bae, K.-H., J.-K. Kang, and C.-W. Lim. 2002. The value of durable bank relationships: Evidence from Korean banking shocks. Journal of Financial Economics 64 (5): 181-214.
4. Ball, R. 2001. Infrastructure requirements for an economically efficient system of public financial reporting and disclosure. Brookings-Wharton Papers on Financial Services, pp. 127-69.
5. Ball, R., A. Robin, and J. S. Wu. 2003. Incentives versus standards: Properties of accounting income in four East Asian countries and implications for acceptance of IAS. Journal of Accounting and Economics 36 (1-3): 235-270.
6. Ball, R., and L. Shivakumar. 2005. Earnings quality in U.K. private firms: Comparative loss recognition timeliness. Journal of Accounting and Economics 39 (1): 83-128.
7. Beatty, R. 1989. Auditor reputation and the pricing of initial public offerings. Accounting Review 64 (4): 693-709.
8. Beatty, A., B. Ke, and K. Petroni. 2002. Earnings management to avoid earnings declines across publicly and privately held banks. Accounting Review 77 (3): 547-70.
9. Becker, C., M. DeFond, J. Jiambalvo, and K. R. Subramanyam. 1998. The effect of audit quality on earnings management. Contemporary Accounting Research 15 (1): 1-24.
10. Bharath, S., J. Sunder, and S. V. Sunder. 2008. Accounting quality and debt contracting. Accounting Review 83 (1): 1-28.
11. Blackwell, D. W., T. R. Noland, and D. B. Winters. 1998. The value of auditor assurance: Evidence from loan pricing. Journal of Accounting Research 36 (1): 57-70.
12. Bushman, R., and J. Piotroski. 2006. Financial reporting incentives for conservative accounting: The influence of legal and political institutions. Journal of Accounting and Economics 42 (1-2): 107-48.
13. Chaney, P., D. C. Jeter, and L. Shivakumar. 2004. Self-selection of auditors and audit pricing in private firms. Accounting Review 79 (1): 51-72.
14. Choi, J. H., J.-B. Kim, and J. Lee. Forthcoming. Value relevance of discretionary accruals in the Asian financial crisis of 1997-1998. Journal of Accounting and Public Policy.
15. Chow, C. 1982. The demand for external auditing: Size, debt and ownership influences. Accounting Review 57 (2): 272-91.
16. Chow, G. C. 1960. Tests of equality between sets of coefficients in two linear regressions. Econometrica 28 (3): 591-603.
17. Chung, R., M. Firth, and J.-B. Kim. 2003. Auditor conservatism and reported earnings. Accounting and Business Research 33 (1): 19-32.
18. Cole, R. A., J. D. Wolken, and L. Woodburn. 1996. Bank and non-bank competition for small business credit: Evidence from the 1987 and 1993 National Surveys of Small Business Finances. Federal Reserve Bulletin 82 (11): 983-95.
19. DeAngelo, L. E. 1981. Auditor size and audit quality. Journal of Accounting and Economics 3 (3): 183-99.
20. DeFond, M., and J. Jiambalvo. 1991. Incidence and circumstances of accounting errors. Accounting Review 66 (3): 643-55.
21. Denis, D., and V. Mihov. 2003. The choice between bank debt, non-bank private debt and public debt: Evidence from new corporate borrowings. Journal of Financial Economics 70 (1): 3-28.
22. Diamond, D. 1984. Financial intermediation and delegated monitoring. Review of Economic Studies 62 (3): 393-414.
23. Diamond, D. 1991. Monitoring and reputation: The choice between bank loans and directly placed debt. Journal of Political Economy 99 (4): 689-721.
24. Diamond, D., and R. Verrecchia. 1991. Disclosure, liquidity, and the cost of capital. Journal of Finance 46 (4): 1405-36.
25. Doidge, C., A. Karolyi, and R. Stulz. 2004. Why are foreign firms listed in the U.S. worth more? Journal of Financial Economics 71 (2): 205-38.
26. Dopuch, N., and D. A. Simunic. 1980. Competition in auditing: An assessment. Proceedings of the Symposium on Auditing Research IV, University of Illinois at Urbana-Champaign, pp. 403-50.
27. Durnev, A., and E. H. Kim. 2005. To steal or not to steal: Firm attributes, legal environment and valuation. The Journal of Finance 60 (3): 1461-93.
28. Fama, E. 1985. What's different about banks? Journal of Monetary Economics 15 (1): 29-39.
29. Fan, J., and T. J. Wong. 2005. Do external auditors perform a corporate governance role in emerging markets? Evidence from East Asia. Journal of Accounting Research 43 (1): 35-72.
30. Fortin, S., and J. A. Pittman. 2007. The role of auditor choice in debt pricing in private firms. Contemporary Accounting Research 24 (3): 859-96.
31. Francis, J. R., I. K. Khurana, X. Martin, and R. Pereira. Forthcoming. The relative importance of firm incentives versus country factors in the demand for audits by private entities. Contemporary Accounting Research.
32. Francis, J. R., I. K. Khurana, and R. Pereira. 2005a. Disclosure incentives and effects on cost of capital around the world. Accounting Review 80 (4): 1125-62.
33. Francis, J., R. LaFond, P. Olsson, and K. Schipper. 2005b. The market pricing of accruals quality. Journal of Accounting and Economics 39 (2): 295-327.
34. Francis, J., and C. Lennox. 2008. Selection models in accounting research. Unpublished paper, University of Missouri-Columbia. Available at.
35. Graham, J. R., S. Li, and J. Qiu. 2008. Corporate misreporting and bank loan contracting. Journal of Financial Economics 89 (1): 44-61.
36. Greene, W. 1990. Econometric analysis. New York: Macmillan.
37. Gul, F., J.-B. Kim, and A. Qiu. 2010. Ownership concentration, foreign shareholding, audit quality and stock price synchronicity: Evidence from China. Journal of Financial Economics 95 (3): 425-42.
38. Heckman, J. 1979. The sample selection bias as a specification error. Econometrica 47 (1): 153-62.
39. Jensen, M., and W. Meckling. 1976. Theory of firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics 3 (2): 305-60.
40. Jeong, S. W., and J. Rho. 2004. Big 6 auditors and audit quality: The Korean evidence. International Journal of Accounting 39 (2): 175-96.
41. Johnson, D., K. Pany, and R. White. 1983. Audit report and the loan decision: Actions and perceptions. Auditing: Journal of Practice and Theory 3: 38-51.
42. Kim, J.-B., R. Chung, and M. Firth. 2003. Auditor conservatism, asymmetric monitoring and discretionary accrual choices. Contemporary Accounting Research 20 (2): 323-60.
43. Kim, J.-B., and H. Shi. 2010. Voluntary IFRS adoption and stock price synchronicity: Do analyst following and institutional infrastructure matter? Working paper, City University of Hong Kong and Fudan University.
44. Kim, J.-B., B. Song, and L. Zhang. 2009. Internal control weakness and bank loan contracting: Evidence from SOX Section 404 disclosures. Working paper, City University of Hong Kong and Concordia University.
45. Kim, J.-B., J. S. L. Tsui, and C. H. Yi. Forthcoming. The voluntary adoption of International Financial Reporting Standards and loan contracting around the world. Review of Accounting Studies.
46. Kim, J.-B., and C. H. Yi. 2006. Ownership structure, business group affiliation, listing status, and earnings management: Evidence from Korea. Contemporary Accounting Research 23 (2): 427-64.
47. Kim, J.-B., and C. H. Yi. 2009. Does auditor designation by the regulatory authority improve audit quality? Korean evidence Journal of Accounting and Public Policy 28 (3): 207-30.
48. Larcker, D. K., and T. O. Rusticus. 2010. On the use of instrumental variables in accounting research. Journal of Accounting and Economics 49 (3): 186-205.
49. Lee, H. Y., T. O'Keefe, and M. Stein. 2003. Client characteristics, abnormal accruals, and auditor switch: An empirical study. Asia-Pacific Journal of Accounting and Economics 10 (1): 31-56.
50. Leuz, C., K. Lins, and F. Warnock. 2009. Do foreigners invest less in poorly governed firms? Review of Financial Studies 22 (8): 3245-85.
51. Leuz, C., and R. E. Verrecchia. 2000. The economic consequences of increased disclosure. Journal of Accounting Research 38 (Supplement): 91-124.
52. Mansi, S. A., W. F. Maxwell, and D. P. Miller. 2004. Does audit quality and tenure matter to investors? Evidence from the bond market. Journal of Accounting Research 42 (4): 755-93.
53. Mitton, T. 2002. A cross-firm analysis of the impact of corporate governance on the East Asian financial crisis. Journal of Financial Economics 64 (2): 215-41.
54. Palmrose, Z.-V. 1988. An analysis of auditor litigation and audit service quality. Accounting Review 63 (1): 97-110.
55. Peek, E., R. Cuijpers, and W. Buijink. 2006. Creditors' and shareholders' demand for accounting conservatism in public vs. private firms. Working paper, Maastricht University.
56. Petersen, M., and R. Rajan. 1994. The benefits of lending relationships: Evidence from small business data. The Journal of Finance 49 (1): 3-37.
57. Pittman, J. A., and S. Fortin. 2004. Auditor choice and the cost of debt capital for newly public firms. Journal of Accounting and Economics 37 (1): 113-36.
58. Rajan, R. 1992. Insiders and outsiders: The choice between relationship and arms-length debt. The Journal of Finance 47 (4): 1367-1400.
59. Teoh, S., and T. J. Wong. 1993. Perceived auditor quality and the earnings response coefficient. Accounting Review 68 (2): 346-66.
60. Weber, J., and M. Willenborg. 2003. Do expert informational intermediaries add value? Evidence from auditors in microcap initial public offerings. Journal of Accounting Research 41 (4): 681-720.