Research On The Relationship Between Audit Quality And Resource Allocation Efficiency From The Perspective Of Media Coverage

The effectiveness of resource allocation determines the development of enterprises and economic growth,and as two important ways of resource allocation,financing and investment play an important role in the macroeconomic and micro-enterprises.In reality,due to information asymmetry and agency problems,capital suppliers require higher returns to compensate for the cost of supervision and risk compensation,which makes the external capital costs higher than the internal capital costs,and results in the prevalence of financing constraints.In addition,on the one hand,because of the existence of financing constraints,the best investment scale of enterprises distorted;on the other hand,because the managements tend to invest to maximize their own income,so both lead to enterprises prone to excessive investment or lack of investment.Thus,information asymmetry and agency issues are the sources of financing constraints and investment failures.Independent audit and media are important regulatory powers in capital market.It plays an important role in information retrieval and information dissemination in capital market,which can reduce information asymmetry and agent problem and help improve the efficiency of resource allocation.Independent audit provides information to the market by authenticating accounting information and issuing audit opinions to play a role in reducing information asymmetry and reducing transaction costs(Busehman and Smith,2001;Bo and Wu,2011).The media has the important function of collecting information and disseminating information.The media coverage can affect the behavior of listed companies such as management,investors,auditors and supervisors,which can help reduce the information and improve the efficiency of corporate governance(Dyck and Zingales,2004;Li and Shen,2010).Due to the different mechanism of media and audit,the timeliness of the media coverage is poor,and it is a short-term effect,but the audit can continuously review and supervise the enterprise,which has a strong timeliness and long-term effect(Zhou et al.,2016;Yang and Zhao,2012;Jensen and Meckling,1976;Watts and Zimmerman,1983).The existing literature examines the impact of media coverage or audit quality on the efficiency of resource allocation,but the lack of interaction between the two on the efficiency of resource allocation.Therefore,this paper systematically discusses whether the media coverage can affect the audit quality of the debt financing,equity financing and investment efficiency of listed companies The paper analyzes the economic consequences of the audit quality from the perspective of media coverage,expands the understanding of the economic consequences of the audit quality,and gives the external information disclosure to the enterprise resource allocation.Influence made a certain theoretical supplement.Based on the basic theory of audit needs,this dissertation analyzes the common path of media coverage and audit quality to resource allocation efficiency from the perspective of agency theory and information theory,and then combined with the"Wanfu Shengke" financial fraud cases,analysis the effectiveness of media coverage mechanism and audit supervision mechanism in China's capital market.And then based on the results of theoretical analysis and case studies,divide the empirical tests into three parts:firstly,the role of audit quality on the financing of listed companies from the perspective of media coverage;secondly,the role of audit quality on the equity financing of listed companies from the perspective of media coverage;thirdly,the effect of audit quality on the efficiency of investment of listed companies from the perspective of media coverage.This dissertation studies four aspects as follows:First of all,take Wanfu Shengke case as an example,this dissertation studies the differences between the media coverage mechanism and the audit supervision mechanism.The findings are as follows:first,the auditor's reputation and the audit quality represented by it play an important role in China's capital market,and the market will show different market responses according to the changes in auditor's reputation and audit quality;second,the media has the ability to reduce the cost of information collection and improve the credibility of the information function,which can have a significant impact on the price of information content.Further,based on the cross-sectional analysis the impact of media negative reports and audit quality on the market response,we find that negative media coverage and lower audit quality would negatively generate excess returns to listed companies;third,the negative response from the negative media coverage is a short-term response,with the influence of time gradually disappearing,and the negative response from audit quality is a long-term response and lasting effect,indicating that the media supervision and audit supervision to bring the market reaction with significant differences.Secondly,this dissertation studies the impact of media coverage and audit quality on the financing of listed companies.We use the debt financing cost,financing convenience and debt maturity to characterize the debt financing ability of listed companies,and use the absolute value of accounting profitability and accounting conservatism are to represent the audit quality of listed companies,and find that:first,high-quality audits promote corporate debt financing,that is,easier access to debt financing,higher borrowings,and lower debt financing cost;second,the increase in the number of positive media coverage will ease the debt financing constraints faced by listed companies,the increase in the number of negative media coverage will increase the debt financing constraints faced by listed companies;third,when the media were positive media coverage,the media reported the number of positive will increase the effect of high quality audit on corporate debt financing constraints,and when the media is negative coverage,the increase in the number of negative media coverage will weaken the mitigation effect of high quality audit on corporate debt financing constraints.Further considering the nature of property rights,political relations and the level of regional financial development and other factors found that non-state-owned enterprises,non-political and low levels of financial development in the listed companies,different media coverage will have a different impact on the audit quality and the relationship between the debt financing relationship of listed companies.Thirdly,this dissertation studies the impact of media coverage and audit quality on the equity capital cost of listed companies.The findings are as follows:first,the audit services of high quality auditors significantly reduce the cost of equity capital of listed companies;second,different media coverage have different effects on the relationship between audit quality and the cost of equity capital of listed companies.When the business is reported by the media,the increase in the number of positive media coverage will strengthen the high cost of capital,and the increase in the number of negative media coverage will weaken the high cost of capital to reduce the cost of equity capital of listed companies when the media is negatively reported by the media.And further considering the nature of property rights and the degree of regional market and other factors found that non-state-owned enterprises and in a low degree of market-oriented areas of listed companies,different media coverage will have different effects on the relationship between audit quality and capital cost of listed companies.Fourthly,this dissertation studies the impact of media coverage and audit quality on the investment efficiency of listed companies.The findings are as follows:first,the high quality audit can help to alleviate the low investment efficiency of listed companies in our country,which can restrain the underinvestment and overinvestment of listed companies,however,the effect of audit quality on the overinvestment is obviously stronger than that of underinvestment;second,the positive media coverage can significantly inhibit the lack of investment,but will increase the excessive investment behavior,and negative media coverage did not significantly inhibit the effectiveness of non-efficient investment;third,the media coverage on the regulatory quality of the regulatory role,positive media coverage enhances the effect of high audit quality on mitigating corporate investment,while negative media coverage weakens the impact of high audit quality on curbing corporate investment.In general,the interaction between media coverage and audit quality has a greater impact on the impact of underinvestment.On the one hand,the negative media coverage has enhanced the supervisory and restrictive effect of high audit quality on the formation of state-owned enterprises,which can better suppress the loss of efficiency of over-investment.On the other hand,the media coverage positively enhances the high audit quality of non-state-owned enterprises to invest in the efficiency of the loss of efficiency.The innovation and academic contribution of this dissertation are as follows:First of all,this dissertation carries out the existing literature on the audit quality and media coverage of two types of research horizontally and deeply.On the one hand,the existing research focus on the impact of the factors of audit quality and the audit quality measurement indicators;on the other hand,about the media coverage,the existing research focused on media supervision on the corporate governance structure of listed companies,the control of private income,management and board members of the reputation of the analysis,these studies are from a single point of view,there is lack of independent audit and media coverage of the economic consequences of the interaction.At the same time,most of the existing research focuses on the macro resource allocation between the whole country and the different industries,and less consideration is given to the micro resource allocation when the distribution main body is individual enterprise,and the object of this paper is micro resource allocation efficiency.At present,there are few literatures to consider the influence of external supervision mechanism on the efficiency of resource allocation.This dissertation combines the two external supervision mechanisms of independent audit and financial media,and studies the influence of the interaction on the efficiency of resource allocation through theoretical analysis and empirical test,which can broaden the research horizons,and realize the innovation of the research perspective.Secondly,this dissertation reveals the mechanism of media coverage on the relationship between audit quality and resource allocation efficiency,and breaks down the differences in the impact of media coverage of different natures.The existing research mainly examines the total amount of media coverage or the impact of negative media coverage on corporate investment and financing,but ignores the role of positive media coverage.This dissertation discovers that the positive media coverage plays a role of "helping the hand",which can strengthen the promotion of high audit quality on corporate debt financing and equity financing.The negative media coverage plays a role of "punishment",which will weaken the high audit quality of corporate debt financing and equity financing to promote the role.However,for the efficiency of investment,the positive media coverage to enhance the high audit quality to ease the role of inadequate investment in the enterprise,and negative media coverage weakens the impact of high audit quality to curb the lack of corporate investment effect.Thirdly,this dissertation uses the event research method to test the market reaction caused by the market reaction and the audit failure caused by the financial fraud,and compares the difference between the media coverage and the audit mechanism.This dissertation finds that the media coverage has the information content,but the timeliness is poor,which belongs to the short-term effect,and the influence is gradually disappearing with the passage of time.The audit is a kind of institutional arrangement to reduce the agency cost and improve the company's value effect.Audit and media coverage are also manifested in two different external oversight mechanisms that reduce the degree of information asymmetry and improve corporate governance.The results of this dissertation provide a new explanation for the differences between the two mechanisms.