Fair Value Accounting and the Cost of Debt: The Role of Auditor Expertise
Fair Value Accounting and the Cost of Debt: The Role of Auditor Expertise
dc.contributor.author | Magnan, Michel | |
dc.contributor.author | Wang, Haiping | |
dc.contributor.author | Shi, Yaqi | |
dc.date.accessioned | 2021-11-12T18:53:57Z | |
dc.date.available | 2021-11-12T18:53:57Z | |
dc.date.issued | 2021 | |
dc.description.abstract | This study examines the association between the use of fair value accounting and the cost of debt, as well as the impact of auditor national-level and city-level industry expertise on this association. Results suggest that more extensive use of fair value accounting measurement in the financial statements is generally associated with a higher cost of debt, primarily driven by Level 2 and Level 3 estimates, which supports the argument that fair value accounting is perceived to exhibit lower reliability. In addition, we find that national-level auditor industry expertise improves the informativeness of Level 1 and Level 3 fair value accounting information to debtholders, whereas city-level auditor industry expertise enhances the information quality of Level 3 fair value estimates to debtholders. Furthermore, we explore the effect of auditor task-specific fair value expertise and find that city-level auditor fair value expertise lowers the cost of debt for firms that use Level 3 fair value measurement. These results hold after correcting for self-selection bias, as well as controlling for the orthogonalized credit ratings and variables associated with firms’ underlying risks. | |
dc.identifier.uri | http://hdl.handle.net/10125/77057 | |
dc.subject | Fair Value Accounting | |
dc.subject | Fair Value Hierarchy | |
dc.subject | Cost of Debt | |
dc.subject | Auditor Industry Expertise | |
dc.subject | Auditor Fair Value Expertise | |
dc.title | Fair Value Accounting and the Cost of Debt: The Role of Auditor Expertise | |
dc.type.dcmi | Text |
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