Two essays on conservatism, auditor choice and debt contracting
Item
-
Title
-
Two essays on conservatism, auditor choice and debt contracting
-
Identifier
-
d_2009_2013:2578a4006a35:10700
-
identifier
-
10792
-
Creator
-
Wu, Fengyun,
-
Contributor
-
Steven H. Lustgarten
-
Date
-
2010
-
Language
-
English
-
Publisher
-
City University of New York.
-
Subject
-
Accounting | Auditor choice | Conservatism | Debt contracting
-
Abstract
-
Essay 1: The private and public debt markets differ in monitoring functions and covenant features. This paper empirically examine whether these differences impact accounting conservatism. I find that firms report more conservatively in the years following the issuance of private debt than the years before. I also find that firms report more conservatively following initial public debt offerings (bond IPOs). However, there is no change in the degree of conservatism around seasoned bond offerings. Firms even report less conservatively when the relative deal size is large. I interpret the results as reflecting differences in monitoring functions of the public and private debt markets.;Essay 2: I examine the impact of a firm's debt structure on its choice of an auditor. The objective is to analyze whether an efficient debt contracting or a managerial opportunism hypothesis better explains a firm's auditor choice. I find that firms with high leverage are less likely to have brand name/specialist auditors, which is consistent with the managerial opportunism hypothesis. I further find that the negative relation turns positive for firms that also have public debt while it holds for firms that have only private debt. This reversal suggests the dominant role of the efficient debt contracting hypothesis for firms that have public debt. I also find that the negative relation is more pronounced for short-term debt than for long-term debt. The findings hold after I control for the potential reciprocal causation between auditor choice and leverage using two-stage procedures.
-
Type
-
dissertation
-
Source
-
2009_2013.csv
-
degree
-
Ph.D.
-
Program
-
Business
