Date of this Version
Journal of Accounting Research
I discuss Minnis  in the context of the broader literature on private firm financing. In particular, I focus on the unique features of the private firm setting and how it affects research design and inference. I detail the alternative information sources available to debt financiers of private firms that may limit the role of auditors and firm financial statements. I review research in the private firm setting that documents the heightened importance of many omitted correlated variables such as the loan characteristics, contractual terms, and the characteristics of the entrepreneur that affect cost of debt. In evaluating the validity of Minnis’s  hypotheses and econometric methods, I report findings from a representative sample of private firms provided by the Federal Reserve Board’s Survey of Small Business Finances.
(Postprint statement) This is the peer reviewed version of the following article: CASSAR, G. (2011), Discussion of The Value of Financial Statement Verification in Debt Financing: Evidence from Private U.S. Firms. Journal of Accounting Research, 49: 507–528., which has been published in final form at http://dx.doi.....2011.00412.x. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving http://olabout.wiley.com/WileyCDA/Section/id-820227.html#terms.
auditing, cost of capital, earnings persistence, private firms
Cassar, G. (2011). Discussion of The Value of Financial Statement Verification in Debt Financing: Evidence from Private U.S. Firms. Journal of Accounting Research, 49 (2), 507-528. http://dx.doi.org/10.1111/j.1475-679X.2011.00412.x
Date Posted: 27 November 2017
This document has been peer reviewed.