We exploit the staggered state-level adoption of the Riegle-Neal Interstate Banking and Branching Efficiency Act (IBBEA) to examine how banking deregulation and the resulting increase in bank competition affect firms’ auditor choices. We find that an exogenous increase in the degree of interstate branch banking deregulation leads to a reduction in firms’ propensity to engage a Big N or industry expert auditor. This main result, when combined with our cross-sectional analyses, offers evidence suggesting that deregulation leads to less demand for higher quality auditors because (1) firms have increased access to credit, which reduces the benefits of higher audit quality; (2) entering banks’ lending expertise substitutes for higher quality financial statements; (3) incumbent banks with less lending expertise seek to protect their rents by preferring that borrowers provide lower quality financial statement information; and (4) external stakeholders delegate their monitoring to banks to a greater degree, resulting in less demand for higher quality financial statements. As such, our study sheds light on how the U.S. credit market's infrastructure shapes firms’ auditor choice decisions.

中文翻译：

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信贷市场发展对审计师选择的影响：银行业放松管制的证据

我们利用《里格尔-尼尔州际银行和分行效率法案》（IBBEA）在州级交错实施的情况来研究银行业放松管制以及由此导致的银行竞争加剧如何影响公司的审计师选择。我们发现，州际分行银行放松管制程度的外生增加会导致公司聘请大N或行业专家审计师的倾向降低。这一主要结果与我们的横断面分析相结合，提供了证据表明放松管制导致对更高质量审计师的需求减少，因为（1）公司获得信贷的机会增加，这减少了更高审计质量的好处； (2) 输入银行的贷款专业知识替代更高质量的财务报表； (3) 贷款专业知识较少的现有银行倾向于通过更愿意借款人提供质量较低的财务报表信息来保护其租金； (4)外部利益相关者更大程度地将监督权委托给银行，从而减少了对更高质量财务报表的需求。因此，我们的研究揭示了美国信贷市场的基础设施如何影响公司的审计选择决策。