The Moderation Effect Of Market Environment On The Relationship Between Auditor Changes And Cost Of Corporation Debt

In recent years,auditor changes of Chinese listed companies are frequently and the quantity are increased year by year,and companies may opportunistically disclose or even hide the real reason of auditor changes.In previous studies,many scholars attribute the essential reason of auditor changes to opinion-shopping,this kind of opportunistic behavior not only undermines the auditor's independence and reduces audit quality,it may also lead to financial information distortion of companies and cause further negative reactions in the capital market.Meanwhile,companies obtain debt financing in the capital market,the creditors bear the risk of default when they provide debt financing to companies.Since creditors do not directly participate in companies business operations,they rely on financial information disclosed by companies for debt financing risk assessment.The negative impact of auditor changes on financial reporting raises creditors' risk,and then creditors increase the price of loans to compensate for risks.Campanies and creditors are participants in the market,both parties' debt financing contracts will also be affected by the market environment when they are executed.The special market environment of China's economic transition period and unbalanced regional economic development are different from the western developed market economy environment.Therefore,when studying the debt financing contract in the Chinese market,we need to combine our country's market environment.Based on Principal-agent Theory,Signaling Theory,and Contract Theory,this paper combines the data of listed companies in China's Shenzhen and Shanghai A shares from 2007 to 2014,and uses theoretical analysis and empirical research to explore the effect of auditor chages and different types of auditor changes on cost of corporation debt,we also introduce market envirnment as a moderator to explore the moderation effect of the market environment on the relationship between auditor changes and different types of auditor changes and cost of corporation debt.The result indicates that:(1)Auditor changes will increase the cost of corporation debt;(2)After dividing auditor changes into three types,we find that The impact of three types of auditor changes on cost of corporation debt is different,upward auditor changes will reduce the cost of corporation debt,lateral auditor changes and downward auditor changes will increase the cost of corporation debt;(3)A better market environment will enhance the role of auditor changes in increasing cost of corporation debt.The further study find that: A better market environment cannot enhance the role of the upward auditor changes reducing the cost of corporation debt,but a better market environment will enhance the role of the lateral auditor changes and downward auditor changes reducing the cost of corporation debt.This paper theoretically expands the research on the economic consequences of auditor changes,and opens up new perspectives on the research of auditing and capital markets in the context of special economic system in China.In addition,this paper provides policy recommendations for our country to strengthen the supervision of information in the audit market and to improve marketization in order to ensure the normal operation of the capital market and the economic benefits of the external information users.