Audit firms with Public Clients in Voluntary Audit-Market
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The aim of this study is to analyze benefits, in term of lower cost of debt, that non-Big4 audit firm with public clients help to obtain to their private clients in a voluntary audit market segment. Survey to partners of non-Big4 aiming to collect first evidences about the effects of auditing public clients have been performed. Multivariate regression on propensity score matched samples of non-listed companies audited by non-Big4 are run to test the hypotheses on the association between non-Big4 audit firm with public clients and cost of debt in their private clients. Results confirm expectations and reveal that the presence, the percentage and the number of public clients in a non-Big4 portfolio is negatively associated with cost of debt of the non-Big4’s private clients. Results show the externalities that the audit firms’ public client specialization has on private firms. Findings reveal that non-Big4 audit firm with public clients are able to transfer benefits associated with higher reputation, competences, litigation risks and incentives toward audit quality to private clients.
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