| Debt financing is the most important form of corporate finance. In the transition period of China. Capital markets are not perfect, external financing channels is relatively simple, so the current corporate finance preferred or debt financing. In debt financing, mainly in three forms:bank loans, corporate bonds, commercial credit. In this three debt financing, bank loans from the scale is always the first choice of corporate finance. According to the2001-2008years of the People’s Bank of China Currency Execution Report data show that the proportion of non-financial institutions by borrowing financing remain at about80%. For businesses, the bank borrowings financing has many advantages for other financing, such as financing procedure is very simple, low cost, the amount of financing will not result in the transfer of control over. Therefore, this paper studies corporate bank loan facility.The existence of information asymmetry, adverse selection and moral hazard problems has been generated. The design of debt covenants, in order to reduce the problem of adverse selection and moral hazard. Creditor and the debtor often designed maturity date, interest rate, and term structure of contract. However, the design of these debt covenants not necessarily be able to guarantee the interests of the creditors, the debtor may still occur in breach of contract, fraud and other acts. Therefore, before the signing of the debt covenants, creditors very want to know the real debtor’s financial information, and audit can improve the trustworthiness of financial information. Then the audit as an independent third party such governance mechanisms Play a significant role in the debt market.With the development of the capital market, a number of companies in the market gradually to rely on their own quality, service established his reputation. Due to the gradual accumulation their reputation in the long-term course of business, the integrity of the legal system and the capital market development during the reduced information asymmetry, then the auditor reputation borrowing costs for the high reputation of the company may slowly weaken. And the problem of information asymmetry in the capital market weakened gradually with the increase of years of business. When considering a loan, the banks and other creditors may be more concerned about the impact of the company’s reputation, rather than the auditors reputation.In the transition period, the state-owned enterprises and non-state-owned enterprises facing different financing constraints. There are significant differences in financing capacity and the cost of state-owned enterprises and non-state-owned enterprises. Soft budget constraint and financial subsidies of state-owned enterprises will impact the debt financing of the state-owned enterprises. In this case, the audit of such third-party governance mechanisms are very much restricted. Although in recent years, China’s state-owned banks has been completed market-oriented reforms, policy loans gradually reduced, but the vast majority of our banks are owned by state-owned and state-owned enterprises and banks belong to the same controller. In this case, the non-state-owned enterprises relative to the state-owned enterprises are still facing financing difficulties.The audit can solve the agency problems between creditors and debtors, then audit in the debt covenants how to play effect, auditor choice for the cost of debt financing has a kind of impact? With the gradual improvement of the market is not there another stealth mechanisms (corporation reputation) also play a role in the debt contract, this stealth mechanism could be replace the role of the audit? Different institutional environment in China, because to differences in the nature of equity in state-owned enterprises and non-state-owned enterprises auditors choices and corporation reputation whether to play o different in the company. The beginning of this study with three question. This paper is divided into six parts, each part of the main contents are as follows:Chapter one, Introduction, mainly elaborated the idea as well as research background and significance of the study, the research framework, research methods, and the contribution of this paper and shortcomings. This chapter from the overall design of research methods and research framework to be described and laid the tone of this study.Chapter two, the literature review, read a lot of literature and analysis. Summary of the selection of auditors, company reputation, and debt financing. Finally, for the relevant literature is reviewed, pointed out the flaws and shortcomings of existing research, and pointed out the direction for this study.Chapter3, theoretical analysis and study assumptions, Including defining concept involved, the use of the theory analysis in this paper. Based on Debt contract theory and reputation theory,three hypotheses has been proposed.(1) Lower the cost of corporate loansto select the top ten audit.(2)With the establishment of the company’s reputation, the auditor choice play the role will be weakened.(3) Plays the role the state-owned enterprises and nonthestate-owned enterprises in the auditor choice and debt financing has been different.Chapter four, the study design and variable definitions, including the building of this design model, the variable is how to define and sample selection. The main variables of this article is the company’s reputation, company reputation measure whether the company received the SFC and the Stock Exchange of punishment Receive punishment in violation of the laws and regulations and other acts that the company has been lower reputation.Chapter five, empirical research and analysis of Results, first overall and sub-sample descriptive statistics. Then empirical results analysis, testing assumptions I and assumptions II, and finally use the Chow test was used to test the hypothesis that the assumptions III. Finally, replace the two variables auditor choice and the company’s reputation for robustness test.Chapter six, conclusions and recommendations, the summary of the assumptions and verification of the above study, research, respectively from the firm of industry organizations, the company itself, the government and the banks to make policy recommendations. Pointed out the inadequacies of this article, as well as the future direction of development.This article the main measure of the cost of debt for bank loans, though we use the interest expense to measure the size of the loan costs, the level of punishment to branch reputation to have received the SFC or the Stock Exchange. Research independent audit and reputation mechanism both in bank loan financing loan costs. Select the1975sample data in the period2009-2011carried out empirical research, added asset size, assets and net profit margin, asset-liability ratio and corporate governance variable control industry and Year. The empirical results show that: (1) Select the top ten domestic firm to audit the company’s borrowing costs significantly lower, that is lower than the non-"Ten" select domestic "Top Ten" audit of the company’s cost of debt financing company. This is because in the credit decision, the creditor will consider the accounting information, accounting information quality Auditing from of the "Top Ten" higher reliability stronger to non’Top Ten"and transfer more valuable signal to creditors, according to the theory of signal transduction.(2) With the establishment of the company’s own reputation, auditor choice will be replaced by the reputation of the company itself. With the reputation of the establishment of the company, banks and other creditors less and less dependent on access to company information from the auditors, because of company’s reputation can convey more reliable information.(3) To consider special institutional environment in China, we found that the state-owned enterprises and non of state-owned enterprises, auditors choose to play a significantly different role, auditors play a stronger role in the non of state-owned enterprises, the company’s reputation to play the role of state-owned enterprises and non-no significant differences between state-owned enterprises. This is also from the side of the company’s reputation better to play a role, and this paper also found that the cost of loans of state-owned enterprises in China is significantly lower than the non-state-owned enterprises, and credit discrimination still exists.Based on the above findings three policy recommendations have been proposed:(1) CICPA should encourage firms to become bigger and stronger, to speed up the the absorption merger between the firms, which is future development of the Certified Public Accountants. However, we must bear in mind that the firm never more bigger audit quality will improve, firms should establish their own reputation, the brand has become the benchmark of the industry. Firms in transition, to carry out third-party business must not forget their own survival is auditing. Government departments should strengthen supervision firm, shaping the legal and regulatory constraints, improve professional standards, vigorously improve the quality of firm’s auditing.(2) In the field of the company’s reputation, the company should never just to meet the limits not to be punished, but should focus on the reputation of the deeper reputation. Upgrade themselves from these aspects of the company’s products, services, This is of great significance for China to establish a sound modern market economy, establish a trust mechanism in the whole society, not only for economic development but also has far-reaching implications for social progress.(3) Should strengthen our system of property rights change, to change the government is both the bank and firm, Make the Bank in accordance with the carrying out of the credit decision can be run in accordance with the market mechanism. Improve credit decision-making, reduce the policy bank loans, banking credit mechanism reform, effectively enables banks to become an important financial tool for promoting economic development.The main contribution of this paper is to:(1) Considering the impact of the independent audit and corporate reputation recessive mechanism for the cost of bank loans, rather than scholars study the impact of the independent audit and corporate reputation unilaterally. Expand the outer edge of the reputation theory is also the auditor choice more in-depth study of excavation(2) Combined with the institutional environment in China, and examine the different effects of these two mechanisms for state-owned enterprises and non-state-owned enterprises, to some extent, the expansion of Western research on reputation mechanisms. This study found that the reputation of this governance mechanism has reduced the company’s cost of debt financing for the different nature of equity, it provides a new perspective to the study of the subsequent debt financing.Limitations of this article is that the design of variable selection and model design. Reputation variables to measure whether the violation has not been recognized, additional control variables selected also there is a certain lack and these need to be improved later. |
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