Third-party auditor liability risk and trade credit policies

Kyiu, Anthony; Tawiah, Bernard; Boasiako, Kwabena; Adasi Manu, Sylvester

Abstract

We investigate the effect of Third-Party Auditor Liability (TPAL) risk on firms’ trade credit policies. Exploiting the staggered state-level changes to TPAL in the US as a quasi-natural experiment, we find that firms in states with a higher risk of TPAL increase their use of trade credit. This relationship is more pronounced for firms with a more enhanced information environment, those with greater financial constraints, and those whose auditors are more exposed to litigation risk. Overall, our findings provide evidence of how TPAL affects firms’ short-term financing needs.

Citation

Kyiu, A., Tawiah, B., Boasiako, K., & Adasi Manu, S. (online). Third-party auditor liability risk and trade credit policies. The British Accounting Review, https://doi.org/10.1016/j.bar.2024.101454

• Journal Article Type: Article
• Acceptance Date: Aug 2, 2024
• Online Publication Date: Aug 6, 2024
• Deposit Date: Aug 7, 2024
• Publicly Available Date: Aug 7, 2024
• Journal: The British Accounting Review
• Print ISSN: 0890-8389
• Electronic ISSN: 1095-8347
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• DOI: https://doi.org/10.1016/j.bar.2024.101454
• Public URL: https://durham-repository.worktribe.com/output/2743492