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We examine the importance of Big Four audits in reducing agency costs evident in corporate debt maturity worldwide. Analyzing a large sample of public firms from 42 countries reveals that the fraction of long-term debt in firms' capital structures rises with the presence of a Big Four auditor, suggesting that higher-quality audits substitute for short-term debt for monitoring purposes. In additional analyses, we find that the role that auditor choice plays in debt maturity is concentrated in firms from countries with strong legal institutions governing property rights and creditor rights. Collectively, our research implies that Big Four audits matter to corporate debt maturity, although the impact is isolated in firms operating in countries with more protective legal regimes.

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This paper tests the portfolio rebalancing model of Hau and Rey (2006) based on a sample of 23 emerging economies for the period of 1994-2010. We find that the exchange rate returns in emerging economies are significantly and positively correlated with excess emerging stock market returns vis-à-vis the United States, indicating that portfolio rebalancing does not characterize the exchange rate movements for emerging economies. Our findings are strongly supported at daily and monthly frequencies, and are robust to cross-market correlations, different stock market capitalizations, alternative exchange rate systems, capital controls and financial crises.