The Empirical Study Of The Relationship Between Audit Opinion And Lenders’ Decision

Audit opinion is an important mechanism to mitigate the agency costs and playsan important role in the capital market. With the continuous development of China’seconomy, the audit opinion is accepted for Shareholders and creditors as an importantbasis when making decisions. My article focuses on the impact of audit opinion onthe lending decisions to investigate the usefulness of audit opinion in the loan market.When companies are facing significant uncertainty risks, there are several operationsfor banks to avoid loss, including increase in lending rates, require the company toreturn the loan in advance, increase in restrictive terms, change the limit of loan. Inmy article, the main objects of study are loan term structure, interest rate of loans andthe quota of loans. In particular, this article is also concerned about another kind ofcreditors of the company, the suppliers. Providing commercial credits can be regardedas to provide interest-free loans, so my study includes not only the decision of thecommercial banks, but also the decision of the suppliers. Under differentenvironmental conditions, the effect of the audit opinion on the lending decisions ofcreditors may be different, my article also gives special consideration to the owners’character of the borrowing company, the scale of the auditor, and the marketizationlevel of the region to find how they influence the effectiveness of audit opinion in theloan market.The second part of the article gives a clear view of the related papers and showsthe gap of them. After using the relevant theory to analyze and bring some hypotheses,I test the hypotheses with the empirical methods. Specific approach is using the datafrom2007to2010of the listed companies in Shenzhen and Shanghai stock exchangemarkets as a sample, choose loan term, interest rate, the changes of the credits asdependent variables, and the audit opinion of the previous year, the type of the borrowers’ owners, the auditor’s scale, marketization level of the region asindependent variables. Besides, the article adds some cross multiply items to findhow they influence the effectiveness of audit opinion in the loan market. In addition,we also selected some indicators as control variables.First, we statistic the frequency of the data, then analyze the correlation of thevariables.After this, regress the data and analyze the results which lead to theconclusion below:1, The company which received unclean audit opinions will facemore strict loan situation such as shorter loan term,higher interest rate and lessamount of loan.2,The companies controlled by the government are more easy toget long term loan, but there is no evidence to show that audit opinions are moreuseful in companies not controlled by the government.3, In the region which has ahigher score of the marketization level, the negative correlation between uncleanaudit opinions and loan decisions is more obvious,which means audit opinions aremore useful in the highly developed regions.4, The audit opinions from the top sixauditor are more effective than the others.5, The company which received uncleanaudit opinions will have difficulties when borrow credits in the next year. This issupported by both bank loans and commercial credits. Both of their growth will slowdown in the next year but not in the same speed. The reduce of the growth of loans isbigger than the commercial credits’, which prove commercial credit can be used as asupplement when bank loans is limited.