Effect of audit firm industry specialization on cost of debt financing: Evidence from Ghana

Figures & data

Table 1. Descriptive statistics

Variable	Obs	Mean	Median	Std. Dev.	Min	Max
DEBT	1,100	0.033	0.020	0.385	−0.789	10.426
SPEC	1,100	0.271	0	0.114	0	1
LR	1,100	2.426	1.162	4.165	−0.898	14.510
SIZE	1,100	18.982	22.153	2.414	12.686	23.087
LEV	1,100	0.765	0.628	1.218	0.001	21.126
ROA	1,100	0.008	0.043	0.407	−5.649	0.715
GROWTH	1,100	0.256	0.114	0.461	−0.847	5.754
BIG4	1,100	0.835	1	0.372	0	1

Table 2. Univariate test

Variable	Non-specialist	Specialist	Difference
DEBT	−0.039	−0.14	0.025*
LR	1.719	2.696	−0.977
SIZE	19.467	19.968	−0.501
LEV	0.891	0.760	0.131
ROA	−0.021	0.021	−0.042*
BIG4	0.772	0.977	−0.205***
GROWTH	0.203	0.216	−0.013

*** p < 0.01, ** p < 0.05, * p < 0.1

Table 3. Correlation analysis

Variables	DEBT	SPEC	LR	SIZE	LEV	BIG4	ROA	GROWTH
DEBT	1.000
SPEC	−0.028***	1.000
LR	−0.007	−0.018	1.000
SIZE	−0.061**	0.205***	0.002	1.000
LEV	0.005	−0.021	−0.026	−0.070**	1.000
BIG4	−0.005	0.321***	−0.054	0.266***	0.009	1.000
ROA	−0.057***	0.019	0.006	0.058*	0.317***	0.121***	1.000
GROWTH	−0.011	0.006	−0.010	−0.007	−0.052	−0.008	0.001	1.000

*** p < 0.01, ** p < 0.05, * p < 0.1

Table 4. Regression results for the effect of specialization on the cost of debt

	Model (1)	Model (2)
SPEC	−0.0177**
	(0.036)
SPEC–Revenue		−0.0219*
		(0.056)
LR	−0.0001***	−0.0001***
	(0.006)	(0.006)
SIZE	−0.0067**	−0.0064***
	(0.035)	(0.005)
LEV	0.0020*	0.0020*
	(0.068)	(0.057)
BIG4	−0.0242**	−0.0263**
	(0.039)	(0.028)
ROA	−0.0570***	−0.0576**
	(0.009)	(0.049)
GROWTH	−0.0034**	−0.0036**
	(0.016)	(0.014)
Constant	0.1734	0.1676
	(0.107)	(0.108)
Year dummy	Yes	Yes
Industry dummy	Yes	Yes
No. of Obs.	1,100	1,100
R-Squared	0.5058	0.4060

P values in parentheses *** p < 0.01, ** p < 0.05, * p < 0.1

Table 5. Robustness results—cost of debt

	Dependent Variable: DEBT
SPEC–Fraction	−0.1307**
	(0.018)
Constant	0.1819
	(0.106)
Year dummy	Yes
Industry dummy	Yes
No. of Obs.	1,100
R-Squared	0.2244

P values in parentheses *** p < 0.01, ** p < 0.05, * p < 0.1

Table 6. Further analysis based on earnings—cost of debt

	High-earning companies		Low-earning companies
	Model (1)	Model (2)	Model (1)	Model (2)
SPEC	−0.0181***		−0.0240**
	(0.005)		(0.015)
SPEC–Revenue		−0.0344**		−0.0581*
		(0.044)		(0.062)
LR	−0.0008**	−0.0009**	−0.0001***	−0.0001***
	(0.014)	(0.015)	(0.002)	(0.002)
SIZE	−0.0171**	−0.0165*	−0.0020	−0.0020
	(0.010)	(0.060)	(0.112)	(0.102)
LEV	0.0093*	0.0095*	0.0001**	0.0001**
	(0.093)	(0.092)	(0.032)	(0.020)
BIG4	−0.0498**	−0.0540	−0.0134*	−0.0134**
	(0.038)	(0.178)	(0.068)	(0.018)
GROWTH	−0.0167**	−0.0171**	−0.0048**	−0.0048**
	(0.038)	(0.039)	(0.027)	(0.016)
Constant	0.4237*	0.4121**	0.0038**	0.0038**
	(0.061)	(0.043)	(0.047)	(0.048)
Year dum	Yes	Yes	Yes	Yes
Industry dum	Yes	Yes	Yes	Yes
No. of Obs.	591	591	509	509
R-Squared	0.5161	0.3164	0.4135	0.3135

Coefficient test between the High and Low earning firms

Model 1(Spec) chi2 (1) = 9.04 Prob > chi2 = 0.0008***

Model 2 (Spec-Rev) chi2 (1) = 12.25 Prob > chi2 = 0.0000***

P values in parentheses *** p < 0.01, ** p < 0.05, * p < 0.1

Table 7. Further analysis by ownership—cost of debt

	State-owned Companies		Private Companies
	Model (2)	Model (3)	Model (2)	Model (3)
SPEC	−0.0156**		−0.0158***
	(0.016)		(0.003)
SPEC–Revenue		−0.0277*		−0.0270**
		(0.065)		(0.022)
LR	−0.0126**	−0.0127**	−0.0080**	−0.0100***
	(0.035)	(0.015)	(0.010)	(0.001)
SIZE	−0.0025***	−0.0032***	−0.0210**	−0.0210*
	(0.002)	(0.002)	(0.013)	(0.063)
LEV	0.0036**	0.0025**	0.0015***	0.0015***
	(0.019)	(0.017)	(0.009)	(0.007)
BIG4	−0.0056**	−0.0112**	−0.1091*	−0.1091
	(0.015)	(0.015)	(0.061)	(0.111)
ROA	−0.1663***	−0.1642***	−0.0200**	−0.0200*
	(0.004)	(0.003)	(0.049)	(0.089)
GROWTH	−0.0111**	−0.0131**	−0.0027**	−0.0027**
	(0.017)	(0.016)	(0.028)	(0.028)
Constant	0.0032*	−0.0112*	0.4346*	0.4346
	(0.061)	(0.059)	(0.064)	(0.611)
Year dum	Yes	Yes	Yes	Yes
Industry dum	Yes	Yes	Yes	Yes
No. of Obs.	392	392	708	708
R-Squared	0.4694	0.3770	0.5118	0.2694

Coefficient test between the state-owned and private firmsModel 1(Spec) chi2 (1) = 0.28 Prob > chi2 = 0.9920Model 2 (Spec-Rev) chi2 (1) = 0.17 Prob > chi2 = 0.6818P values in parentheses *** p < 0.01, ** p < 0.05, * p < 0.1