Derivation of Corporate Debt Pricing Model and Its Empirical Implications

ABSTRACT: We examine the link between auditor-related tax services and corporate debt pricing. After controlling for security-level and other firm-level determinants, we provide strong, robust evidence that bondholders reward public firms that pay proportionately more tax fees to their auditor with lower yield spreads. Our results include that the influence of auditor-related tax services on lowering borrowing costs is stronger for issues made by firms suffering worse information asymmetry. This research, which helps to resolve whether audit quality hinges on the relative amount of tax services, may have important policy implications given that regulators continue to debate whether to impose further restrictions on the tax services that auditors can provide to their clients. Altogether, our evidence implies that the benefit of tax services in improving auditor knowledge—stemming from public accounting firms learning more about their clients over successive engagements—outweighs any concurrent sacrifice in auditor independence in shaping debt market perceptions.

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Chapter 11, Private Workouts and Corporate Debt Pricing under Asymmetric Information

SSRN Electronic Journal ◽

10.2139/ssrn.424283 ◽

2003 ◽

Cited By ~ 4

Author(s):

Nan Chen

Keyword(s):

Asymmetric Information ◽

Corporate Debt ◽

Debt Pricing

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Does rating analyst subjectivity affect corporate debt pricing?

Journal of Financial Economics ◽

10.1016/j.jfineco.2016.02.006 ◽

2016 ◽

Vol 120 (3) ◽

pp. 514-538 ◽

Cited By ~ 40

Author(s):

Cesare Fracassi ◽

Stefan Petry ◽

Geoffrey Tate

Keyword(s):

Corporate Debt ◽

Debt Pricing

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Sequential Difficulty Effects During Strategy Execution

Experimental Psychology (formerly Zeitschrift für Experimentelle Psychologie) ◽

10.1027/1618-3169/a000157 ◽

2012 ◽

Vol 59 (5) ◽

pp. 295-301 ◽

Cited By ~ 35

Author(s):

Kim Uittenhove ◽

Patrick Lemaire

Keyword(s):

Computational Models ◽

Preceding Trial ◽

Human Cognition ◽

Strategy Execution ◽

Strategy Performance ◽

Empirical Implications

In two experiments, we tested the hypothesis that strategy performance on a given trial is influenced by the difficulty of the strategy executed on the immediately preceding trial, an effect that we call strategy sequential difficulty effect. Participants’ task was to provide approximate sums to two-digit addition problems by using cued rounding strategies. Results showed that performance was poorer after a difficult strategy than after an easy strategy. Our results have important theoretical and empirical implications for computational models of strategy choices and for furthering our understanding of strategic variations in arithmetic as well as in human cognition in general.

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