Purpose: – The purpose of this study is to examine the relationship between debt level and performance among small and medium-sized enterprises (SMEs).Design/methodology/approach: – Unlike the vast majority of previous research, this study uses three-stage least squares (3SLS) and fixed-effects models to analyse a comprehensive, cross-sectoral sample of 15,897 Swedish SMEs operating in five industry sectors during the 2009-2012 period.Findings: – This study confirms that debt ratios, in terms of trade credit, short-term debt and long-term debt, negatively affect firm performance in terms of profitability. As a high debt ratio seems to increase the agency costs and the risk of losing control of the firm, SME owners and managers tend to finance their businesses with equity capital to a fairly high degree.Practical implications: – As debt policy significantly influences firm performance, and thereby firm value and survival, SME owners and managers should focus on finding a satisfactory debt level.Originality/value: – To the authors’ best knowledge, this study is among the first to use 3SLS and fixed-effects models to analyse the relationship between debt level and firm performance. Moreover, while most previous research has examined listed firms, this study highlights the issue among SMEs, which play a fundamental role in the economy.

Purpose: – The purpose of this paper is to seek to investigate the impact of cash conversion cycle (CCC) on performance (i.e. profitability) in Swedish small and medium-sized enterprises (SMEs) over the 2008-2011 period. Design/methodology/approach: – The study uses a seemingly unrelated regression (SUR) model to analyse cross-sectional panel data covering 13,797 SMEs operating in four industries. Findings: – The study provides empirical evidence that CCC significantly affects profitability. In addition, the firm-level control variables size, age, and industry affiliation significantly affect firm profitability. These findings imply that managers could increase firm profitability by improving their working capital management. Research limitations/implications: – The present study is limited to a sample of Swedish SMEs in four industries; further research could examine the generalizability of these findings to other countries and industries. Practical implications: – Improved working capital policy could improve firm profitability by reducing the firm's CCC, thereby creating additional firm value. In addition, the results can be used for other purposes, including monitoring of firms by auditors, debt holders, and other stakeholders. Originality/value: – The present study contributes to the literature by employing a SUR model to analyse a comprehensive cross-sectoral sample in a high-tax environment. To the authors’ knowledge, this is the first empirical study to address this issue in the Swedish context based on a large data set covering SMEs in various industries.

Purpose: The purpose of this paper is to address the impact of ethical culture on audit quality under conditions of time budget pressure. The study also tests the relationship between ethical culture and time budget pressure.Design/methodology/approach: The study is based on a field survey of financial auditors employed by audit firms operating in Sweden.Findings: The study finds relationships between three ethical culture factors and reduced audit quality acts. The ethical environment and the use of penalties to enforce ethical norms are negatively related to reduced audit quality acts, whereas the demand for obedience to authorities is positively related to reduced audit quality acts. Underreporting of time is not related to ethical culture, but is positively related to time budget pressure. Finally, the study finds a relationship between two ethical culture factors and time budget pressure, indicating a possible causal relationship, but ethical culture does not mediate an indirect effect of time budget pressure on reduced audit quality acts.Originality/value: This is the first study to report the effect of ethical culture on dysfunctional auditor behavior using actual self‐reported frequencies of reduced audit quality acts and underreporting of time as data.

Purpose – This paper aims to develop a classification scheme of different types of value for money (VFM) audits with different degrees of compliance audit, and to classify the performance audits carried out by the Swedish National Audit Office (SNAO) during its first six years as an independent state audit organization reporting to parliament. Design/methodology/approach – The empirical data were gathered from all of the 150 audit reports published by the SNAO from its establishment in 2003 to the end of 2008. Seminars were arranged to discuss the classifications for validation. Findings – The focus on traditional VFM audits (the “Three Es”) is unusual. Most audits carried out by the SNAO combine different types of extended VFM audits with compliance audit. On the one hand, they audit how the government and/or central agencies fulfil their mandates (from good to bad). On the other, they audit how the government and/or central agencies adhere to legislation, rules and policies (right or wrong). In some cases, the SNAO equates compliance audit with performance audit. Practical implications – The authors have verbalised and visualised performance audit activities of interest not only to state auditors, but also to external stakeholders. One practical implication is that the Swedish national audit committee has conducted an evaluation of the SNAO that is partly based on the national report of this study, and has proposed a stronger focus on the Three Es. Originality/value – The study addresses a new approach in terms of a classification scheme for performance audits, consisting of eight types of VFM audits and three degrees of compliance audit, and creating 24 possible combinations.