The impact of filing micro-entity accounts and the disclosure of reporting accountants on credit scores: an exploratory study

Peel, Michael J. ORCID: https://orcid.org/0000-0002-7444-390X 2019. The impact of filing micro-entity accounts and the disclosure of reporting accountants on credit scores: an exploratory study. Accounting and Business Research 49 (6) , pp. 648-681. 10.1080/00014788.2018.1493374

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Abstract

There is a dearth of evidence regarding the potential costs incurred by small private companies that opt to publish only an unaudited abbreviated balance sheet. This paper provides new evidence regarding whether UK companies that publish reduced balance sheet information in micro-entity annual accounts are allocated lower credit scores by a credit rating agency. Recently, for the smallest companies, a new exemption category for ‘micro-entities’ was introduced. Qualifying companies may elect to file even less unaudited balance sheet information than their small company counterparts. Consistent with the conjecture that publishing micro accounts conveys a negative signal to the credit scorer, there is systematic evidence that micro-entities are assigned worse credit scores. This result is robust to the employment of statistical methods that account for observed and unobserved bias. Based on both assurance and signalling tenets, the second novel conjecture examined in this study, is that companies which disclose their annual accounts are prepared by an accountancy firm (reporting accountant) will attract higher credit scores. Contrary to extant research which reports that companies that opt for voluntary audits receive higher credit scores, there is no evidence that the credit scorer rewards companies whose accounts bear the imprimatur of a reporting accountant.

Item Type:	Article
Date Type:	Publication
Status:	Published
Schools:	Business (Including Economics)
Publisher:	Taylor & Francis
ISSN:	0001-4788
Date of First Compliant Deposit:	23 May 2018
Date of Acceptance:	22 May 2018
Last Modified:	07 Nov 2023 01:29
URI:	https://orca.cardiff.ac.uk/id/eprint/111660

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