Does auditor ratification matter to bondholders? Evidence from new bond issues |
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| Institution: | 1. School of Accountancy, College of Business and Analytics Southern Illinois University Carbondale, IL 62901-4619, United States;2. Turner School of Accounting University of North Carolina Charlotte Belk College of Business 9201 University City Blvd., Charlotte, NC 28223, United States;1. University of Wisconsin – Milwaukee, Lubar School of Business, P.O. Box 742, Milwaukee, WI 53201, USA;2. East Carolina University, 3412 Bate Building, Greenville, NC 27858, USA;1. Mercer University, United States;2. University of Nevada, Las Vegas, United States;3. Norwegian School of Economics (NHH), Norway;1. Washington State University, Pullman, WA 99164, United States;2. Bentley University, Waltham, MA 02452, United States;1. University of Texas at San Antonio, One UTSA Circle, San Antonio, TX 78249-0631, United States;2. University of Kansas, United States;3. University of Alabama, United States;1. Paul W. Parkison Department of Accounting, Ball State University, Muncie, IN 47306, United States;2. School of Accountancy, University of Nebraska-Lincoln, United States |
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| Abstract: | We investigate the relation between shareholder votes on auditor ratification and the client’s credit risk, using both parametric and nonparametric regression techniques. Using data from 2006 to 2016, we show that the proportion of shareholder disapproval for auditors heterogeneously impacts credit risk, as shown by bond spread and bond rating. The results suggest that higher shareholder disapproval of the auditor has an adverse effect on yield spread and bond ratings after controlling for firm characteristics associated with audit quality, such as auditor size and tenure. |
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| Keywords: | Auditor ratification Bondholders Yield-spread Bond ratings Audit quality |
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