Auditor Choice and Corporate Bond Ratings: International Evidence

Hamdi Ben-Nasr, Hatem Ghouma, El-Mehdi Alami

Abstract

Using a sample of 823 firms from 35 countries, we examine the impact of auditor’s choice on bonds ratings.  An Ordered Probit Regression Model was used to identify how the auditor choice affects the probability of bond ratings.  We find strong evidence that the auditor’s choice significantly affects the bond ratings.  The model also shows that the quality of legal and extra-legal institutions plays an important role in improving debt ratings.  More specifically, we find that the existence and the enforcement of creditor laws are associated with higher bond rating. 

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