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Author Minnis, Michael Craig
Title The value of financial statement verification in debt financing: Evidence from private U.S. firms
book jacket
Descript 71 p
Note Source: Dissertation Abstracts International, Volume: 71-12, Section: A, page: 4448
Adviser: Russell J. Lundholm
Thesis (Ph.D.)--University of Michigan, 2010
I examine how the verification of financial statements influences lenders' debt pricing decisions. To do so, I obtain access to a large proprietary database of privately-held U.S. firms, an important business sector in which the information environment is opaque and financial statement audits are not mandated. I find not only that audited firms have a significantly lower cost of debt, but also that lenders place significantly more weight on audited, compared to unaudited, financial information in setting the interest rate. Further, I provide evidence of a mechanism for this increased financial statement usefulness: accruals from audited financial statements are better predictors of future cash flows. Collectively, I provide novel evidence that audited financial statements are more informative and that this significantly influences lenders' decisions
School code: 0127
Host Item Dissertation Abstracts International 71-12A
Subject Business Administration, Accounting
Economics, Finance
0272
0508
Alt Author University of Michigan
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