The effects of industry expertise on cost of debt: an individual auditor-level analysis. Issue 3 (11th September 2017)

• Record Type: Journal Article
• Authors: Wang, Ying-Chieh; Huang, Hua Wei; Chiou, Jeng-Ren; Huang, Yu Chieh
• Is Part Of: Asian review of accounting. Volume 25:Issue 3(2017)
• Page Start: 322
• Page End: 334
• Publication Date: 2017-09-11
• Subjects: Cost of debt -- Individual auditor level -- Industry specialization; Accounting -- Asia -- Periodicals; Accounting -- Pacific Area -- Periodicals; Accounting -- Periodicals; 657.095
• DOI: 10.1108/ARA-08-2014-0092
• Languages: English
• ISSNs: 1321-7348

Abstract

Abstract : Purpose: The purpose of this paper is to examine the association between the cost of debt (COD) and auditor industry expertise using Taiwanese data. Since previous studies (Li et al., 2010) have only examined the relation between industry specialization and COD at the audit firm level in western countries, the authors further examine the association between industry specialization and COD at the individual auditor level in an Asian context. Design/methodology/approach: The authors use the interest rate on the firm's debt as a proxy variable for the COD (Francis, Khurana and Pereira, 2005). The authors adopt three different methods to measure industry specialization, which consist of the auditors' market share in terms of client sales and number of clients, and client assets. Findings: The results indicate that the clients of industry specialists at individual auditor levels have a lower COD. Originality/value: First, the authors extend the research of Li et al . (2010) and find that the clients of individual auditor industry specialists also have a lower COD. Second, the authors also believe the evidence on the effects of industry expertise at the individual auditor level may have policy implications for regulators and public investors. Finally, in contrast to works carried out in the US market, the authors provide empirical evidence for the relation between industry specialization and COD in an Asian market.