Non-audit services and the cost of debt in private firms

[en] This study examines whether the provision of NAS by the incumbent auditor matters to the debt pricing of large private firms as debt financing is an important financing source of private firms. We take advantage of the Belgian context where large private firms are mandated to disclose NAS fees and a detailed debt description in the financial statements. Based on a sample of large private Belgian firms, we find that creditors that demand financial statement reliability are more likely to charge a lower cost of debt when a firm purchases NAS from the incumbent auditor. We attribute this finding to creditors perceiving NAS as value-additive. However, this finding dissipates when creditors demand higher financial statement reliability, indicating that more complex lending negotiations offset the beneficial effects from NAS. Lastly, we document a stronger negative association between NAS purchase and the cost of debt when the purchased NAS type is connected to the firm’s accounting information.

Disciplines :

Accounting & auditing

Author, co-author :

Compagnie, Vincent ; Université de Liège - ULiège > HEC Liège Research > HEC Liège Research: Strategy & Performance for the Society

Jeny, Anne ; IESEG School of Management

Orens, Raf ; KU Leuven

Language :

English

Title :

Non-audit services and the cost of debt in private firms

Publication date :

27 April 2025

Journal title :

Accounting in Europe

ISSN :

1744-9480

eISSN :

1744-9499

Publisher :

Informa UK Limited

Pages :

1-28

Peer reviewed :

Peer Reviewed verified by ORBi

Additional URL :

https://www.tandfonline.com/doi/pdf/10.1080/17449480.2025.2493100

Funders :

FWO - Research Foundation Flanders

Available on ORBi :

since 28 April 2025

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