Arbeitspapier
Mandatory auditor choice and small firm finance: Evidence from Finland
We study the capital market implications of mandatory auditor choice. This regulatory intervention provides us with an instrument that can be used to examine the role of asymmetric information in the market for small business finance. We propose, in particular, a new exogenous measure of information based on a legal requirement that makes it mandatory for firms above a certain size to use certified auditors. Using a large panel on Finnish (mostly) closely held small businesses we find that despite significant market-driven demand for auditing, the legal requirement forces some firms to use a certified auditor. The cost of debt capital for a small business that is forced to use a certified auditor goes down and its creditworthiness, as measured by a commercial credit rating, improves. These results are consistent with the view that asymmetric information and, in particular, borrower-lender conflict are empirically relevant in the market for small business finance.
- Sprache
-
Englisch
- Erschienen in
-
Series: ETLA Discussion Papers ; No. 950
- Klassifikation
-
Wirtschaft
Information and Market Efficiency; Event Studies; Insider Trading
Capital Budgeting; Fixed Investment and Inventory Studies; Capacity
Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- Thema
-
auditing
small business finance
cost of debt capital
regression discontinuity
tilintarkastus
pk-yritysrahoitus
vieraan pääoman kustannukset
Klein- und Mittelunternehmen
Revision
Kapitalkosten
Finnland
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Hyytinen, Ari
Väänänen, Lotta
- Ereignis
-
Veröffentlichung
- (wer)
-
The Research Institute of the Finnish Economy (ETLA)
- (wo)
-
Helsinki
- (wann)
-
2004
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:46 MEZ
Datenpartner
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Objekttyp
- Arbeitspapier
Beteiligte
- Hyytinen, Ari
- Väänänen, Lotta
- The Research Institute of the Finnish Economy (ETLA)
Entstanden
- 2004
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