The Effects Of Indepenent Audit Quality On Debt Agency Cost

In China’s listed companies, with the development of the establishing a modern enterprise system, the companies’ internal relationship has become more and more complex.To break the bottleneck of corporate governance, the researchers begin to focus on the company’s external balance mechanism,and the debt financing governance is introduced in the corporate governance’s research category. Debt financing can improve corporate governance efficiency,however,debt capital can also cause various interests infringed, cause debt agency cost, and affect the company’s market value. To improve the company’s governance efficiency and reduce debt agency cost, we need to perfect creditor protection mechanism, which act on the external of company to exert influence on it, and become the exterior governance. However, in our country, the law that protect creditor is not as good as that in the developed countries’ capital market.In this case,independent audit,as a alternative external protection mechanism, can provide more reliable information to creditors, alleviate the problem of the asymmetry of information, so as to improve the possibility of creditor protection itself. So this paper attempts from the angle of independent audit to explore how to reduce debt agency cost.In chapterⅠ, firstly,the paper introduced the sense of the research question.for debt agency cost will reduce the value of the company and shareholders, and affect the company debt financing effeciency, then impact far-reaching effects to the size of the corporate governance, so we want from independent audit’s angle to provide a new idea to improve the governance effects. Secondly, the paper introduced the methods and content, it combine the normative research and empirical studies.ChapterⅡstate the stakeholder theory, corporate governance theory,financing structure theory,and the genesis of debt agency costs to analyze the causes of debt agency costs, points out the necessity of reducing debt agency costs; Then based on our background, explained that our legal system can hardly protect the creditor,we can make use of independent audit to reduce debt agency cost.Independent can improve information disclosed quality, ease information-non-assymetrical questions, and improve the company management effect.ChapterⅢis the literature review. Firstly,the paper quoted the foreign scholars’ research about debt financing,such as Jensen, Meckling, Grossman, Hart, Myers and Majluf.And quoted domestic famous scholars’ opinion such as Zhangweiying on this problem. Then, cited for the transparency of information’s influence on debt financing, Finally, this paper expounds the domestic and overseas scholars’ research about independent audit quality, citing the definition of independent audit and audit quality, firm scale’s and the company independent directors influence on audit quality, find the two key factors about independent audit quality, namely the auditor independence and professional competence.Finally,based on a review of related literatures, the article points out that the deficiency of the existing research, so as to find my own research breakthrough.ChapterⅣis empirical research. Firstly, the paper selects interest expense ratio, debt-equity ratio and bank loan increment percentage to express company long-term debt agency cost.And choose firm scale, the change of firms and the independent director as audit quality alternative variable, then join the company size, business growth and accrued items as the control variables.The author made three research hypotheses, trying to prove that independent audit quality can affect the rate of interest expense, debt-equity ratio and bank loan increment caused by long-term. Then selected sample and set a model, conducted variable descriptive analysis and explored the relationship between the variables. Finally,begain multivariate regression analysis and concludes that verify whether the results of multiple regression analysis can support this assumption.ChapterⅥput forward policy Suggestions, and discussed the research limitations and the follow-up prospects. Based on the empirical analysis basis, the article put some methods to reduce debt agency cost, improve the relevant way over debt financing. This paper also discussed the space limitations and future studies.The main innovation of this paper is:(1) this paper only retains the samples that get clean opinions, because be not clean audit opinions of the listed company, although probably is for chosing high quality independent audit and be shown the auditing opinions of the more conservative, but the not clean opinions will play the warning role to creditors, so cannot reduce debt agency cost.If not to screening of research results may cause interference.(2) This paper put in debt-equity ratio as the dependent variable, used to measure the discretion of debt agency cost. Generally speaking, if the company willing to adopt more debt financing, show that debt agency cost is less than equity agency cost.This index showed the company debt costs more in-depth; And if the creditors are willing to take out loans,meant them think the company chose independent audit of high quality.