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Motivating Capital Investment by Using the Audit Process to Increase Financial Transparency

Author

Listed:
  • J Reid Cummings
  • Gabriel G Ramirez
  • Divesh S Sharma
  • Kyre D Lahtinen

Abstract

This study examines the relationship between REITs’ uses of the audit process to increase financial transparency, and their ability to attract and/or maintain reasonable access to capital investment. We find that capital investment is positively and significantly associated with auditor quality, specialization, and reputation. After controlling for the effects of the 2007-2008 financial crisis, we find that when REITs seek to attract new capital investment, using the audit process to increase financial transparency is just as important before the crisis as after it. These findings suggest that regardless of the economic conditions, auditor quality, specialization, and reputation add value.This study examines the relationship between REITs’ uses of the audit process to increase financial transparency, and their ability to attract and/or maintain reasonable access to capital investment. We find that capital investment is positively and significantly associated with auditor quality, specialization, and reputation. After controlling for the effects of the 2007-2008 financial crisis, we find that when REITs seek to attract new capital investment, using the audit process to increase financial transparency is just as important before the crisis as after it. These findings suggest that regardless of the economic conditions, auditor quality, specialization, and reputation add value.

Suggested Citation

  • J Reid Cummings & Gabriel G Ramirez & Divesh S Sharma & Kyre D Lahtinen, 2018. "Motivating Capital Investment by Using the Audit Process to Increase Financial Transparency," Asian Journal of Finance & Accounting, Macrothink Institute, vol. 10(1), pages 81114-81114, December.
    • Handle: RePEc:mth:ajfa88:v:10:y:2018:i:1:p:81114
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    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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