@phdthesis{8569111,
  abstract     = {{One important prerequisite for sustainable economic growth – which is an important goal for many
emerging countries - is access to finance (Ayyagari, Demirguec-Kunt, & Maksimovic, 2008; DemirgucKunt
& Maksimovic, 1998). Unfortunately, access to financing for companies in emerging countries is often
hindered by severe information asymmetry (Atkins & Glen, 1992). Auditing is one of the monitoring
mechanisms used by firms to reduce agency problems between managers and company’s stakeholders
(Jensen & Meckling, 1976; Watts & Zimmerman, 1983). By verifying the validity of financial statements
and providing assurance that financial statements faithfully reflect a company’s underlying economics,
auditors play a role as financial intermediaries enhancing the credibility of financial information (Becker,
DeFond, Jiambalvo, & Subramanyam, 1998; DeFond & Zhang, 2014) and reducing information
asymmetry.
The first study examines whether the affiliation of local Indonesian audit firms with one of the Big4 reduces
the cost of debt for listed companies in Indonesia. This study demonstrates that companies audited by
local audit firms affiliated with Big4 audit firms enjoy significantly lower interest rates even in a less-litigious
environment like Indonesia. This finding is consistent with the idea that creditors perceive the choice of a
reputable high quality auditor as a signal of credible financial information.
The second study investigates whether the potential impact of foreign investors and board members might
have on auditor choice depends on whether they originate from a developed versus from another emerging
country. The study highlights that in an emerging country like Indonesia especially ownership and board
membership from developed foreign countries is positively associated with the selection of Big4 audit firms.
This finding supports the view that cultural differences drive different tendencies of auditor choice. Foreign
investors and board members from developed countries probably attach more importance on the
assurance from high quality Big4 audit firms, as compared to foreign investors from emerging countries.
The third study examines whether the choice of Big4 audit firms affects the capital structure of companies.
The study documents that companies audited by Big4 audit firms display lower debt ratios than those
audited by non-Big4 audit firms, consistent with the idea that reduced information asymmetry}},
  author       = {{Kurniawati, Heny}},
  language     = {{eng}},
  pages        = {{XII, 147}},
  publisher    = {{Ghent University. Faculty of Economics and Business Administration}},
  school       = {{Ghent University}},
  title        = {{The determinants and consequences of auditor choice in Indonesia}},
  year         = {{2018}},
}