Studies on Determinants and Consequences of Financial Reporting Quality Defended on Thursday, 26 November 2015

The purpose of this dissertation is to investigate determinants and consequences of financial reporting quality. The first study explores the consequences of financial reporting quality in a setting that is characterized by low demand for high quality financial reporting. The second and third studies focus on audit- related determinants of financial reporting quality. In chapter 2, I study the impact of high quality financial reporting on private firms’ access to bank debt and trade credit capital. The results suggest that high quality financial reporting does have economic consequences even in the presence of private communication that serve as alternative information asymmetry- mitigating mechanisms. Chapter 3 investigates the relation between auditor size and audit quality for private firms in a setting in which large auditors have materially weak incentives to retain their audit quality advantage. My analysis provides evidence that the otherwise positive relation between auditor size and audit quality reverses when the incentives of large auditors to deliver superior audit quality become sufficiently weak. Chapter 4 examines the effect of the political connections of auditors on audit quality. The results suggest that politically connected offices deliver superior audit quality than non- politically connected offices. However, the positive relation between audit office political connectedness and audit quality dissipates for those clients that are politically connected themselves. Overall, the three studies of this dissertation highlight the importance of auditor incentives in shaping financial reporting quality as well as the significance of accounting information even in settings with low demand for high quality financial reporting.


Private firms, financial reporting quality, determinants, consequences, political connections, Big 4, auditors

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