Causes and Consequences of Improvements in Information Environment of Private Swedish Small and Mid-Sized Firms

• In Event: Corporate Disclosure and Corporate Governance

Abstract

We investigate improvements in the information environment and cost of debt implications for a sample of Swedish small and mid-sized firms. We create an index that captures choices of accounting standards, auditor quality, and board size and that reflects improvements in the information environment. We find that the need for financing triggers improvements in the information environment: The most common actions are to switch to a Big 4 auditor or a chartered accountant and to add board members. These improvements result in a reduction of the cost of debt. Our findings are relevant for the discussion on accounting regulation for private firms both in the U.S. and Europe since they show that (Swedish) private firms have other ways to improve the information environment besides adopting valuation-oriented accounting standards.

Keywords: Private firms, small and mid-sized firms, information environment, accounting regulation, cost of debt, corporate governance, IFRS

Authors

• Mari Ann-Charlotte Paananen, University of Exeter

• Marita Blomkvist, Halmstad University

• Annelies Renders, Maastricht University