摘要：This research studies the relation between audit firm choice and benefits that companies could gain in terms of lower cost of debt and ea rnings management. It focuses on private clients and the non-Big4 audit market segment, where the main driver of auditor choice has not to date been satisfactorily identified. This study identifies and tests a new criterion for auditor choice in private firms based on audit market boundaries (European vs Domestic audit firms). Using a propensity score matched sample of private companies audited by non-Big4 audit firms in the period 2010 – 2014, this research finds that the choice of a European audit firm is negative ly associated with cost of debt and earnings management. Private firms that choose audit firms operating at European level, as consequence, have lower cost of debt and earnings management, mitigate the agency conflicts between lenders and owner/manager, and improve their corporate governance mechanisms.
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