Research On The Impact Of Disclosure Of Key Audit Matters On Corporate Debt Financing Costs

Debt financing is one of the major financing channels for enterprises.Enterprises need to reduce this financing cost to ensure good business performance and sustainable development.Since 2017,we have required all listed companies to disclose Key Audit Matters in their audit reports.It’s worth discussing and studying whether the reform of these Key Audit Matters can improve the financing situation of enterprises by easing the information gap between banks and enterprises.Based on this,this paper discusses the impact of the reform on the debt financing costs of A-share listed companies taking the new audit report standards reform as a time node,and conducts a horizontal study on whether the differences in the number and types of disclosures between enterprises have different impacts on debt financing.In this paper,we collect the data related to Key Audit Matters and debt financing for A-share listed companies whose audit results were standard qualified between 2016 and 2020.And then conduct an empirical study using a fixed-effect model to examine the correlation between variables.Firstly,we comb and summarize the relevant existing research results,then analyze and research how Key Audit Matters affect the transmission mechanism of debt financing cost according to principal-agent theory,information asymmetry theory,and signal transmission theory.Based on this,the paper puts forward three hypotheses and establishes the corresponding fixed-effect model to explore the impact of Key Audit Matters on debt financing costs,and further distinguishes between different properties for empirical analysis and robustness testing.After this study,it was found that the disclosure of key audit matters is indeed helpful to bridge the information gap between banks and enterprises.After disclosure in accordance with the standards,the overall cost of debt financing for enterprises showed a downward trend.And across firms,as the number of disclosures increases,firms’ debt financing costs decrease.After distinguishing property rights in the study,it can be concluded that the increase in the number of disclosures has a more significant impact on reducing the cost of debt financing for non-state-owned enterprises.Finally,different types of disclosures have different impacts.Disclosure of matters related to inventory recognition and measurement and impairment of goodwill plays a significant role in reducing the cost of corporate debt financing,while the remaining two items tested are not significant.In order to further optimize the financing cost of enterprises,this paper puts forward practical opinions and suggestions from the following aspects: Firstly,when disclosing key audit matters,it emphasizes the individuality and differentiation of disclosed matters among enterprises,and avoids homogenization of disclosed content.Secondly,enterprises should strengthen internal management,improve internal control,maintain good credit,improve the quality of information disclosed to the market,and send positive information signals to the market;thirdly,management should actively cooperate with audit procedures,strengthen the relationship with certified public accountants communication,focusing on the number and types of disclosures of key audit matters.In this way,the cost of debt financing for enterprises can be controlled,and it is guaranteed that the enterprise has sufficient funds to expand operations and achieve stable development.