This paper explores the effects of public information (e.g., accounting earnings) in a competitive lending setting where the borrower can engage in risk shifting. If a privately informed "inside" creditor bids against outsider creditors, public information levels the playing field with...

Conventional wisdom suggests that audit risk disclosure improves the overall efficiency because investors are more informed of a client's financial performance. This view, while intuitive, ignores a potential externality of audit risk disclosure on auditor competence. We consider a two-period...

This study investigates the effects of mandatory audit risk disclosure on audit quality, audit fees, and investment efficiency. We consider a two-period model wherein an auditor acquires private information about a company’s risk of material misstatement, thereby reducing the detection risk....