University of Illinois Urbana-Champaign

What is the interplay between auditing and regulatory investigations? Evidence from the municipal bond market

Brumley, Bethany

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BRUMLEY-DISSERTATION-2022.pdf

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https://hdl.handle.net/2142/115707

Description

Title
What is the interplay between auditing and regulatory investigations? Evidence from the municipal bond market
Author(s)
Brumley, Bethany
Issue Date
2022-04-18
Director of Research (if dissertation) or Advisor (if thesis)
Thompson, Anne
Doctoral Committee Chair(s)
Thompson, Anne
Committee Member(s)
  • Almeida, Heitor
  • Sougiannis, Theodore
  • Urcan, Oktay
Department of Study
Accountancy
Discipline
Accountancy
Degree Granting Institution
University of Illinois at Urbana-Champaign
Degree Name
Ph.D.
Degree Level
Dissertation
Keyword(s)
  • auditing
  • disclosure regulation
  • SEC enforcement
  • municipal bonds
Abstract
I examine how auditing and regulatory investigations impact compliance with disclosure regulation and the cost of debt in the municipal bond market. Widespread noncompliance led the SEC to initiate an enforcement program and Louisiana to pass a state law requiring auditors to test compliance with disclosure regulation. I find that municipal bond issuers increase disclosure frequency by 32 percent following regulatory investigations without auditing and incrementally increase disclosure frequency by 59 percent following regulatory investigations with auditing, suggesting that they are complementary enforcement mechanisms. The cost of debt for new bond issues decreases by 11 basis points following regulatory investigations with auditing but does not change following regulatory investigations without auditing, suggesting that auditing decreases investors’ perception of default risk. Overall, my findings inform policy makers and regulators on the role of auditing over compliance with disclosure regulation as a mechanism to protect investors.
Graduation Semester
2022-05
Type of Resource
Thesis
Handle URL
https://hdl.handle.net/2142/115707
Copyright and License Information
Copyright 2022 Bethany Brumley

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