Internal Control,Audit Quality And Debt Financing Costs

Debt financing is still the main external financing way.And the cost of debt is the key index for the management of the company in the daily business decisions.In order to ensure the healthy operation of the capital chain,reduce the cost of debt has become a major proposition of external financing.The final cost of debt is made by the determination of creditors basing on enterprise's operational risk and the accounting financial reports of the enterprise.Therefore,how to reduce the agency costs and ease the information asymmetry,to reduce business risk and ensure the quality of accounting information,so as to reduce the cost of debt is worth paying attention to.The enterprise internal control system and external audit as two important company internal and external governance mechanism is an important institutional arrangement to ensure the reliability of financial reporting,internal control and audit quality reflects the level of business risk.But the present literature lacks the research on the influence of the internal and external governance mechanism on the debt cost from two aspects.At the same time,the effect of internal control on the cost of debt is different under different levels of audit quality.But in recent years the Chinese government start to promote the interest rate marketization,and government intervention to bank credit is reduced,so that financial institutions which have the right to decide loan interest rates pays more attention to the debtor's business risk and the financial accounting information disclosure level,and then increased the impact of internal control and audit quality on the cost of debt financing.In this paper,A shares of Listed Companies in 2015 as the sample.Then we use DIB-internal control indexes,ranking of accounting firms and relevant report information to discuss the influence of internal control,audit quality and the cost of debt.Descriptive characteristics of all variables were analyzed using SPSS regression analysis.Then the Pearson correlation test was done.Finally,regression analysis was carried out through three models,in order to test the impact of internal control on the cost of debt financing,the effect of audit quality on the cost of debt financing,and the relationship between internal control and debt cost when the audit quality is different.At last,this paper has run further test under different property right,whether there is a difference effect among internal control,audit quality and the cost of debt.The results show that:(1)Internal control can reduce the cost of debt by listed companies;(2)Audit quality can constrain the cost of debt by listed companies;(3)The impact of internal control on debt cost is more significant for firms with lower audit quality;(4)In the non-state-owned listed companies,the impact of internal control and audit quality on the debt cost is more significant than that of state-owned listed companies.At last,the paper has state some suggestions.