Auditor Industry Expertise Audit Quality And Debt Financing Cost

Debt financing is the most important financing channel for Chinese companies.On the one hand,there are restrictions on equity financing in the market and the limited strength of the company.Not all companies can carry out;on the other hand,when using debt financing,debt interest can be deducted from pre-tax profits,which is often said.Interest tax deduction." So far,debt financing has remained one of the most important financing methods in China and has received wide attention.When financing a company,it is usually expected to obtain more debt financing and lower debt financing costs.In terms of debt financing costs,due to the existence of risk premium,in order to obtain lower debt financing costs,the financial information provided must be objective and reliable,so that creditors can understand the company's real business.In order to guarantee authentic and reliable information,an independent third party,social audit,is required for its purpose.Social auditing stems from the separation of property ownership and management rights and is a bridge of information.The audit industry is developing in a healthy and orderly manner,and it is necessary to consider the role of a better information bridge.Therefore,auditor industry expertise may be a key factor influencing the cost of debt financing.It is of far-reaching theoretical significance to study how auditor industry expertise affects the cost of debt financing by affecting audit quality.Auditors with industry expertise,using their professional knowledge and relevant experience,they will have better ability to discover misstatements,which may reduce information asymmetry,improve information transparency,and reduce corporate debt financing costs.External high-quality audits can inhibit the company's earnings manipulation related behavior,thereby increasing the credibility of financial statements,which may reduce agency costs and information asymmetry.Based on this,this paper studies the issue of whether auditor industry expertise can reduce the cost of corporate debt financing.In addition,the audit quality of the company's financial statements may be subject to the auditor's industry expertise.It can be seen that there may be an intrinsic link between the auditor's industry expertise,audit quality and debt financing costs.Therefore,this paper puts the three into the same logical framework,and the path between the auditor's industry expertise and debt financing costs.Whether the relationship is further analyzed based on the perspective of audit quality intermediary effect can more thoroughly study the path mechanism of debt financing costs based on the impact of auditor industry expertise,and study in detail the impact mechanism of auditor's industry expertise on debt financing costs.Most of the existing literatures use audit size indicators to establish audit quality indicators to examine the relationship between audit firm quality and auditor industry expertise.Few studies have explored the micro-mechanism that auditor industry expertise first impacts on debt financing costs through audit quality.Based on this,firstly,under the guidance of related theories such as information asymmetry,the existing relevant literature content is sorted out.Based on the normative analysis,the related concepts of auditor industry expertise,audit quality and debt financing cost are discussed.It is defined,the related measurement methods are classified and analyzed,and then the correlation between variables is analyzed.The mediation effect theory is introduced to analyze the mediating effect that audit quality may have between auditor industry expertise and debt financing cost.Secondly,after proposing relevant theoretical hypotheses,a total of 16,164 samples were selected from the Shanghai and Shenzhen A-share listed companies from 2011 to 2017 to test the research hypothesis.In the empirical analysis part,the descriptive statistics of the sample company's data were firstly studied,and the basic characteristics of the data were understood.Then the correlation analysis was carried out,and the correlation between the variables was preliminarily verified,and then the regression analysis was carried out.The empirical results show that:(1)the auditor industry expertise is significantly negatively correlated with the debt financing cost,and is significantly positively correlated with the audit quality.(2)The audit quality plays a part of the intermediary role.(3)Further analysis shows that this role is more significant in private enterprises.Not obvious in state-owned enterprises.