Public Auditor Oversight and Adjustment Speed of Capital Structure: Evidence from the PCAOB International Inspection Program

Posted: 31 Jan 2022

See all articles by Ha Thanh Nguyen

Ha Thanh Nguyen

La Trobe University - La Trobe Business School

Darren Henry

La Trobe University - Department of Economics and Finance; Financial Research Network (FIRN)

Balachandran Muniandy

La Trobe University - School of Accounting

Date Written: January 21, 2022

Abstract

This study examines the impact of the public auditor oversight by the Public Company Accounting Oversight Board (PCAOB) on non-US firms’ adjustment speed of capital structure. Using a difference-in-difference research design to analyse a sample of 104,880 firm-year observations in 32 non-US countries from 2002 to 2018, we find that non-US clients of PCAOB-inspected foreign auditors increase their adjustment speed of capital structure after their foreign auditors undergo the initial PCAOB inspections. Our results also suggest that the benefits of PCAOB oversight on management capital structure decisions are concentrated for non-US firms located in countries without a strict local auditor oversight system.

Keywords: Public Auditor Oversight; PCAOB International Inspection; Speed of Adjustment; Capital Structure

JEL Classification: M41; G32

Suggested Citation

Nguyen, Ha Thanh and Henry, Darren and Muniandy, Balachandran, Public Auditor Oversight and Adjustment Speed of Capital Structure: Evidence from the PCAOB International Inspection Program (January 21, 2022). Available at SSRN: https://ssrn.com/abstract=4014007

Ha Thanh Nguyen

La Trobe University - La Trobe Business School ( email )

Australia

Darren Henry

La Trobe University - Department of Economics and Finance ( email )

Department of Economics and Finance
La Trobe Business School
Bundoora 3086 Victoria
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Balachandran Muniandy (Contact Author)

La Trobe University - School of Accounting ( email )

P.O. Box 199, Bendigo
Victoria, 3552
Australia

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