The relationship between the cost of capital and audit services, a case study in Italy's environment.

Abstract

In accordance with the literature, auditing services provided by Big 4 firms are tied to a lower cost of capital for their clients. This can be traced down to the more assurance provided by Big 4 firms, which reduces the information asymmetry between the firm and investors, and more broadly all financial statements users. The audit market is rather unique and complex, especially in Italy: using a sample of Italian firms, a comparison between Big 4 vs Non-Big 4 clients cost of capital will be conducted to investigate if the international literature suggestion is confirmed or not in the Italian environment.