The Conversion Of The Organization Form Of Accounting Firm,Audit Quality And Debt Financing Costs

Debt financing as the main external financing channel for Chinese enterprises,the cost of debt has become an important factor that must be considered.It not only affects the efficiency of financing,but also affects the future performance growth and business development.If the cost of debt financing is too high,it will make the enterprise's capital chain difficult to operate normally and may even make enterprises overwhelmed and also make it difficult to continue as a going concern.Therefore,it is important to explore how to reduce the cost of corporate debt financing.Previous research shows that the asymmetric information between creditors and enterprises as well as agency conflicts will lead to an increase in corporate debt financing costs.Foreign scholars believe that the effective supervision of external audit can ease the information asymmetry and agency conflict between them,thus reducing the cost of debt financing enterprises.However,because of the background of China's socialist market economy with special features,the mechanism of the impact of external audit on the cost of debt financing needs to be further explored.Specifically,this study considers that high-quality auditing of financial statements is an important mechanism for resolving information asymmetry and agency conflicts and helps to reduce the debt financing costs of enterprises.In 2010,our country's accounting firm transformed from a limited liability system to a special general partnership system,This provided a natural experimental place for examining the impact of the increased legal liability of auditors on the quality of auditing and the cost of debt financing.The legal environment,as an important part of the institutional environment,provides the institutional basis for the governance effect which played by accounting firm transformation.Regional differences in the legal environment also have a different impact on the relationship between accounting firm transformation,audit quality and debt financing costs.This study examines the impact on audit quality and debt financing costs because of the increased auditor's legal liability which was brought by accounting firm transformation,and taking A-share listed companies in China from 2009 to 2014 as research samples,investigating variable impact on debt financing cost caused by accounting firm transformation under different legal environment.The conclusion of the study shows that the accounting firm's conversion has improved the audit quality and restrained the cost of debt financing.The audit quality has all mediation effect on the relationship between the auditor's legal liability and the cost of debt financing.The inhibitory effect of increased legal responsibility in auditors caused by accounting firm conversion could be influence by different legal environments.The conclusion of this paper provides theoretical basis and policy basis for discussing how to reduce the cost of debt financing of enterprises and the governance effect played by accounting firm transformation.