Please use this identifier to cite or link to this item: http://hdl.handle.net/10397/8914
Title: Auditor size, tenure, and bank loan pricing
Authors: Kim, JB
Song, BY
Tsui, JSL
Keywords: Auditor size
Auditor tenure
Loan pricing
Loan rate
Issue Date: 2013
Source: Review of quantitative finance and accounting, 2013, v. 40, no. 1, p. 75-99 How to cite?
Journal: Review of Quantitative Finance and Accounting 
Abstract: Using a large sample of U. S. bank loan data from 1996 to 2008, we investigate the relation between two auditor characteristics, namely, auditor size and tenure, and loan interest rates. Our results show the following: First, we find that the loan interest rate is significantly lower for borrowers with prestigious Big 4 auditors than for borrowers with non-Big 4 auditors. Second, we find that auditor tenure is negatively associated with the loan interest rate, suggesting that a long client-auditor relationship lowers the loan borrowing cost. Third, we find that the negative association between auditor size and loan rate is more pronounced for transaction-based term loans than for relationship-based revolving loans. Fourth, our sub-period tests show that our results are driven by the post-Sarbanes-Oxley Act period. Our study provides direct evidence that auditor size and tenure are incremental credit risk-reducing factors in the bank loan market.
URI: http://hdl.handle.net/10397/8914
ISSN: 0924-865X
DOI: 10.1007/s11156-011-0270-z
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