Empirical Research On The Effects Of Audit Information In Corporate Trade Credit Financing

Financing behaviors have been hot issues in both academic and practical fields, among which trade credit financing is really important which occupied approximately70%in the U.S. and80%in UK of total amount of commercial credit (Atanasova and Wilson,2004). Even in the less developed financial and capital markets, the scale of trade credit financing is also gradually increasing, which can be seen as an alternative option for companies troubled with financing channels.Rational using of trade credit financing is significant in aspects of easing financing constraints, broadening the commercial channels and adjusting the structure of capital. Current studies mainly focus on commercial credit financing motive theory, the relationship between trade credit financing and bank credit facilities and other factors influencing the results. However, there are not too many studies on the relationship between independent audits and trade credit financing. Chen Yunsun and Wang Yutao (2010) studied the relationship between audit quality and trade credit financing costs and argued that audit quality has a positive effect on decision-making behavior of suppliers.Zhang Yong (2013) proved that audit opinion will influence the scale of commercial credit financing. Their research showed the auditing can relieve information asymmetry between enterprises and suppliers and improve the quality of financing decisions. However, the existing research does not answer the relationship between independent audit and trade credit financing, such as the influence of audit quality on the scale of financing and the influence of audit opinion on financing costs.Based on the above analysis, this thesis selected the scale of trade credit as the research object, from both audit opinion and audit quality to analyze the influence on trade credit financing and then discuss the interaction between these two components. In addition, the thesis analyze whether the high-quality audit will increase the effectiveness of influence of audit opinion on the scale of credit. Samples of the thesis are from the companies listed on the A-shares Main Board as and measurement controls the factors such as firm size, profitability, business growth, cash holdings and business ownership. The empirical results show that if the listed companies are issued non-standard audit opinion, the size of trade credit financing will significantly reduce in the following year. However, Audit quality as the single factors failed to show the impact on the scale of trade credit financing. If considering the interaction between the quality of audit and the audit opinion, it turns out high-quality audit can enhance the impact of non-standard audit opinion on the scale of trade credit financing.This thesis is divided into six parts and each chapter is organized as follows:The first chapter is introduction, including research background, research significance, the structure and innovations. Former scholars are more concerned about the relationship between the independent audit with shareholders and creditors, but few scholars are concerned about the role of independent audit between enterprises and suppliers, which is selected as the main research direction of this thesis.The second chapter is the literature review of independent audit in credit market, commercial research and the relationship between independent audit and trade credit financing respectively.The third chapter is the theoretical analysis, which describes the theory of asymmetric information, theory of investor protection and theory of audit business credit financing.The fourth chapter is the research hypothesis and research method, which is based on asymmetric information and theory of investor protection. The hypothesis of this thesis is:firstly, listed companies issued with non-standard audit opinion will reduce the size of financing in the following year; secondly, listed companies with a high-quality audit will increase the size of financing in the following year; thirdly, high-quality audit will have a positive effect on the impact of non-standard audit.The fifth chapter is empirical testing and analysis, including descriptive statistics and correlation analysis of the main variables, regression results analysis and robustness tests. The sixth chapter is conclusion and implication, which summarize the findings, limitations and future research direction according to the analysis result.The contributions of the study are:1. A compliment from the aspect of stakeholder.Corporate stakeholders include shareholders, creditors, suppliers, customers and employees, and so on. Auditing ensures the transmission of information between companies and stakeholders, which makes sense in reducing information asymmetry. However, auditing information is more than just investors and banking institutions, it also influences the relationship between enterprises and suppliers, which are not paid so much attention. Thus, this thesis analyzes from this aspect to study the influence of auditing information on suppliers, which complements the research range.2. A compliment to commercial credit-related researchCurrent research focuses on commercial credit in the internal factors such as size of company, the nature of property rights, financial condition and other external factors such as monetary policy, macroeconomic situation. This thesis innovates on the influence of independent audit on trade credit financing. The result turns out that non-standard opinion will reduce the scale of financing; the quality of auditing will increase the impact of credit opinion on credit scale. Thus this analysis offers new research direction and compliments the reflection on auditing information.3. A proof on the influence of audit information on the decision-making of supplier.The results show that listed companies issued with non-standard audit opinion will reduce the scale of commercial credit in the following year and high-quality audit opinion will increase the effect of auditing on financing, which proves that the auditing information is significant to suppliers. Although the hypothesis that high-quality auditing information will increase the scale of commercial financing is failed to prove, the results can still explain the current value of auditing information in credit. Compared to other studies, the thesis at the first time proves the impact of auditing information on suppliers, which is important in improving the quality of auditing information.