Auditor Quality and Debt Covenants
研究了高质量审计师对债务合同中财务契约的影响，发现高质量审计师与更少、更宽松的契约以及更低的违约概率相关，并缓解了违约对借款成本的负面影响。
Abstract This study examines the impact of auditor quality on financial covenants in debt contracts. We conjecture that high‐quality auditors have two related effects on these debt covenants: (i) they encourage fewer and less restrictive covenants by providing assurance to lenders at contract inception and, consequently, (ii) they ensure a lower probability of eventual covenant violations. Consistent with the conjectures, we find that auditor quality is negatively associated with the intensity and tightness of financial covenants. Specifically, high‐quality auditors are associated with fewer covenants (especially performance covenants) and less binding covenants. Additionally, we find that auditor quality is negatively associated with the likelihood of covenant violations. In an ancillary test, we provide evidence that high‐quality auditors mitigate the detrimental effect of covenant violations on the cost of borrowing. Together, these findings highlight the important role of auditors in debt contracting.