Signing Auditors’ Foreign Experience and Debt Financing Costs: Evidence for Sustainability of Chinese Listed Companies
Abstract
:1. Introduction
2. Institutional Background
3. Literature Review and Hypotheses Development
3.1. Signing Auditors’ Foreign Experience and Debt Financing Costs
3.2. Signing Auditors’ Foreign Experience, Audit Firm Industry Expertise and Debt Financing Costs
4. Research Method
4.1. Sample and Data
4.2. Empirical Model
5. Empirical Results
5.1. Descriptive Statistics
5.2. Pearson Correlation Test
5.3. Main Results
5.3.1. Signing Auditors’ Foreign Experience and Debt Financing Costs
5.3.2. Signing Auditors’ Foreign Experience, Audit Firm Industry Expertise and Debt Financing Costs
5.4. Robustness Checks
5.4.1. Using Other Measure of Foreign Experience
5.4.2. Using Other Measures of Debt Financing Costs
5.4.3. Using the Propensity Score Matching (PSM) Approach
5.4.4. Using Fixed Effects Model
5.5. Further Tests
6. Conclusions
Author Contributions
Funding
Conflicts of Interest
Appendix A
Variables | Measurements |
---|---|
DFC | Debt financing costs, measured as the interest expenses divided by total debt; |
FOR | An indicator variable for the signing auditors with foreign experience, equaling 1 if signing auditors have foreign experience and 0 otherwise; |
SPEC | An indicator variable for audit firm industry specialization, equaling 1 if the audit firm is largest or second-largest supplier in the industry by market shares in terms of clients’ total audit fees and 0 otherwise; |
BIG10 | An indicator variable, equaling 1 if the audit firm is one of the top 10 auditors or their affiliated firms (the CICPA annual ranking) and 0 otherwise; |
SIZE | Firm size, measured as the natural logarithm of total assets; |
LEV | Financial leverage, computed as the ratio of long-term liabilities to total assets; |
ROS | Return on total sales, computed as the operating profit scaled by total revenue; |
LISTAGE | The number of years a company has been listed; |
ACCA | The account receivables scaled by total assets; |
TANG | Net property, plant and equipment scaled by total assets; |
STATE | A dummy variable, equaling 1 if a firm’s ultimate owner is a local (central) government or state-owned enterprise and 0 otherwise; |
YEAR | Dummy variable that equals 1 if it belongs to the current year and 0 otherwise; |
IND | Dummy variable that equals 1 if it belongs to this industry and 0 otherwise. |
AF | Dummy variable that equals 1 if it belongs to this audit firm and 0 otherwise |
Appendix B
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Panel A: Descriptive Statistics | ||||||||
Variables | N | MEAN | SD | MIN | p25 | p50 | p75 | MAX |
DFC(%) | 21375 | 2.329 | 1.586 | 0.000 | 1.011 | 2.233 | 3.432 | 6.579 |
FOR | 21375 | 0.031 | 0.174 | 0.000 | 0.000 | 0.000 | 0.000 | 1.000 |
SPEC | 21375 | 0.185 | 0.388 | 0.000 | 0.000 | 0.000 | 0.000 | 1.000 |
BIG10 | 21375 | 0.447 | 0.497 | 0.000 | 0.000 | 0.000 | 1.000 | 1.000 |
SIZE | 21375 | 21.882 | 1.229 | 19.551 | 21.000 | 21.719 | 22.577 | 25.726 |
LEV | 21375 | 0.059 | 0.089 | 0.000 | 0.000 | 0.016 | 0.084 | 0.413 |
ROS | 21375 | 0.068 | 0.165 | −0.790 | 0.019 | 0.061 | 0.130 | 0.565 |
LISTAGE | 21375 | 9.050 | 5.813 | 1.000 | 4.000 | 8.000 | 14.000 | 22.000 |
ACCA | 21375 | 0.114 | 0.101 | 0.000 | 0.032 | 0.089 | 0.167 | 0.460 |
TANG | 21375 | 0.258 | 0.177 | 0.003 | 0.118 | 0.225 | 0.369 | 0.750 |
STATE | 21375 | 0.538 | 0.499 | 0.000 | 0.000 | 1.000 | 1.000 | 1.000 |
Panel B: Univariate Tests | ||||||||
Variables | FOR = 0 (20708) | FOR = 1 (667) | MEANDIFF | MEDIANDIFF | ||||
MEAN | MEDIAN | MEAN | MEDIAN | |||||
DFC | 0.023 | 0.022 | 0.022 | 0.021 | 0.002 * | 2.857 * |
Variables | (1) | (2) | (3) | (4) | (5) | (6) | (7) | (8) | (9) | (10) | (11) | |
---|---|---|---|---|---|---|---|---|---|---|---|---|
DFC | (1) | 1.000 | ||||||||||
FOR | (2) | −0.013 * | 1.000 | |||||||||
SPEC | (3) | −0.028 *** | −0.003 | 1.000 | ||||||||
BIG10 | (4) | −0.067 *** | −0.020 *** | 0.436 *** | 1.000 | |||||||
SIZE | (5) | −0.011 | 0.027 *** | 0.120 *** | 0.260 *** | 1.000 | ||||||
LEV | (6) | 0.156 *** | 0.021 *** | −0.003 | 0.024 *** | 0.362 *** | 1.000 | |||||
ROS | (7) | −0.151 *** | 0.004 | 0.030 *** | 0.042 *** | 0.125 *** | 0.020 *** | 1.000 | ||||
LISTAGE | (8) | 0.061 *** | 0.004 | 0.003 | 0.091 *** | 0.323 *** | 0.178 *** | −0.083 *** | 1.000 | |||
ACCA | (9) | −0.036 *** | 0.007 | −0.007 | −0.021 *** | −0.232 *** | −0.277 *** | −0.151 *** | −0.237 *** | 1.000 | ||
TANG | (10) | 0.241 *** | 0.018 ** | −0.029 *** | −0.062 *** | 0.036 *** | 0.228 *** | −0.077 *** | −0.040 *** | −0.272 *** | 1.000 | |
STATE | (11) | 0.048 *** | 0.029 *** | −0.068 *** | −0.084 *** | 0.201 *** | 0.177 *** | −0.036 *** | 0.226 *** | −0.142 *** | 0.222 *** | 1.000 |
Variables | Predicted Sign | DFC (%) | |
---|---|---|---|
coefficient | t-Value | ||
FOR | − | −0.192 *** | −3.43 |
BIG10 | − | −0.123 *** | −3.97 |
SIZE | −or+ | 0.007 | 0.64 |
LEV | + | 3.162 *** | 22.29 |
ROS | − | −1.462 *** | −19.18 |
LISTAGE | + | 0.035 *** | 16.91 |
ACCA | + | 1.438 *** | 12.47 |
TANG | + | 2.297 *** | 30.75 |
STATE | − | −0.320 *** | −13.54 |
CONSTANT | −or+ | 2.806 *** | 11.48 |
YEAR | YES | ||
IND | YES | ||
AF | YES | ||
Observations | 21375 | ||
Adj R2 | 0.235 | ||
F | 86.259 *** |
Variables | Predicted Sign | DFC (%) | |
---|---|---|---|
Coefficient | t-Value | ||
FOR | − | −0.249 *** | −4.06 |
SPEC | − | −0.069 ** | −2.24 |
FOR*SPEC | + | 0.298 ** | 2.07 |
BIG10 | − | −0.114 *** | −3.63 |
SIZE | −or+ | 0.008 | 0.75 |
LEV | + | 3.158 *** | 22.29 |
ROS | − | −1.463 *** | −19.19 |
LISTAGE | + | 0.035 *** | 16.81 |
ACCA | + | 1.444 *** | 12.52 |
TANG | + | 2.300 *** | 30.82 |
STATE | − | −0.321 *** | −13.54 |
CONSTANT | −or+ | 2.792 *** | 11.41 |
YEAR | YES | ||
IND | YES | ||
AF | YES | ||
Observations | 21375 | ||
Adj R2 | 0.235 | ||
F | 84.433 *** |
Variables | DFC (%) | |||
---|---|---|---|---|
(1) | (2) | |||
Coefficient | t-Value | Coefficient | t-Value | |
FOR_1 | −0.308 *** | -3.77 | −0.345 *** | −3.71 |
SPEC | −0.057 * | −1.87 | ||
FOR_1*SPEC | 0.339 * | 1.79 | ||
BIG10 | −0.126 *** | −4.05 | −0.056 * | −1.73 |
SIZE | 0.007 | 0.65 | 0.001 | 0.07 |
LEV | 3.162 *** | 22.30 | 2.994 *** | 21.52 |
ROS | −1.460 *** | −19.15 | −1.415 *** | −18.61 |
LISTAGE | 0.035 *** | 16.84 | 0.034 *** | 16.61 |
ACCA | 1.438 *** | 12.47 | 1.861 *** | 16.35 |
TANG | 2.300 *** | 30.81 | 2.126 *** | 28.19 |
STATE | −0.319 *** | −13.47 | −0.320 *** | −13.70 |
CONSTANT | 2.790 *** | 11.43 | 3.071 *** | 12.47 |
YEAR | YES | YES | ||
IND | YES | YES | ||
AF | YES | YES | ||
Observations | 21375 | 21375 | ||
Adj R2 | 0.235 | 0.251 | ||
F | 86.345 | 87.226 *** |
Variables | DFC_1 (%) | |||
---|---|---|---|---|
(1) | (2) | |||
coefficient | t-Value | coefficient | t-Value | |
FOR | −0.222 *** | −3.32 | −0.297 *** | −4.14 |
SPEC | −0.073 * | −1.94 | ||
FOR*SPEC | 0.401 ** | 2.19 | ||
BIG10 | −0.128 *** | −3.43 | −0.119 *** | −3.14 |
SIZE | −0.007 | −0.57 | -0.006 | −0.47 |
LEV | 2.155 *** | 13.34 | 2.151 *** | 13.32 |
ROS | −1.429 *** | −15.21 | −1.430 *** | −15.21 |
LISTAGE | 0.047 *** | 18.46 | 0.047 *** | 18.36 |
ACCA | 0.772 *** | 5.49 | 0.779 *** | 5.54 |
TANG | 2.212 *** | 24.67 | 2.217 *** | 24.74 |
STATE | −0.362 *** | −12.68 | −0.362 *** | −12.69 |
CONSTANT | 4.022 *** | 13.58 | 4.007 *** | 13.53 |
YEAR | YES | YES | ||
IND | YES | YES | ||
AF | YES | YES | ||
Observations | 21375 | 21375 | ||
Adj R2 | 0.177 | 0.177 | ||
F | 60.936 *** | 59.658 *** |
Variables | FOR | DFC (%) | ||||
---|---|---|---|---|---|---|
(1) | (2) | (3) | ||||
Coefficient | z-Value | Coefficient | t-Value | Coefficient | t-Value | |
SEA_FIRM | 0.600 *** | 2.98 | ||||
SEA_ACC | 0.340 * | 1.70 | ||||
FORSHR | 1.009 ** | 2.08 | ||||
FOR | −0.209 ** | −2.29 | −0.289 *** | −2.96 | ||
SPEC | −0.032 | −0.21 | ||||
FOR*SPEC | 0.350* | 1.76 | ||||
BIG10 | −0.257 ** | −2.16 | −0.236 ** | −1.98 | ||
SIZE | 0.202 *** | 4.78 | −0.036 | −0.89 | −0.012 | −0.30 |
LEV | −0.154 | −0.31 | 3.299 *** | 5.52 | 3.210 *** | 5.29 |
ROS | −0.325 | −1.45 | −1.547 *** | −4.95 | −1.559 *** | −5.02 |
LISTAGE | 0.014 * | 1.72 | 0.014 | 1.63 | ||
ACCA | 1.165 ** | 2.35 | 1.298 *** | 2.63 | ||
TANG | 1.895 *** | 5.92 | 1.976 *** | 6.26 | ||
STATE | 0.094 | 0.96 | −0.177 * | −1.85 | −0.179 * | −1.87 |
CONSTANT | −8.118 *** | −9.09 | 4.234 *** | 4.35 | 3.863 *** | 4.07 |
YEAR/IND | YES | YES | YES | |||
AF | YES | YES | ||||
Observations | 21375 | 1330 | 1330 | |||
Pse R2/Adj R2 | 0.052 | 0.242 | 0.245 | |||
Chi2/F | 308.821 *** | 6.426 *** | 6.986 *** |
Variables | DFC (%) | |
---|---|---|
Coefficient | t-Value | |
FOR | −0.117 ** | −2.18 |
BIG10 | 0.030 | 1.28 |
SIZE | 0.107 *** | 6.21 |
LEV | 0.673 *** | 4.96 |
ROS | −1.207 *** | −20.54 |
LISTAGE | 0.212 *** | 3.90 |
ACCA | 1.944 *** | 13.46 |
TANG | 2.590*** | 30.00 |
STATE | −0.122 *** | −3.10 |
CONSTANT | −0.265 | −0.73 |
YEAR | YES | |
Observations | 21375 | |
Adj R2 | 0.187 | |
F | 116.204 *** |
Variables | (1) | (2) | (3) | |||
---|---|---|---|---|---|---|
DA | DA_RET | SP | ||||
Coefficient | t-Value | Coefficient | t-Value | Coefficient | z-Value | |
FOR | −0.007 ** | −1.98 | −0.008 ** | −2.04 | −0.533 * | −1.91 |
SPEC | −0.007 *** | −3.28 | −0.006 *** | −2.75 | −0.221 * | −1.79 |
BIG10 | −0.004 * | −1.76 | −0.004 * | −1.85 | 0.184 | 1.55 |
SIZE | 0.002 ** | 2.57 | 0.001 * | 1.67 | −0.492 *** | −10.84 |
LEV | 0.168 *** | 33.07 | 0.143 *** | 27.54 | −0.563 *** | −5.26 |
ROS | 0.074 *** | 7.96 | 0.073 *** | 7.77 | 0.515 | 0.98 |
LISTAGE | −0.000 | −0.39 | −0.000 | −0.76 | 0.052 *** | 6.85 |
ACCA | 0.154 *** | 17.86 | 0.122 *** | 14.25 | 0.258 | 0.65 |
STATE | −0.002 | −1.48 | −0.002 | −1.33 | −0.059 | −0.70 |
CONSTANT | −0.065 *** | −3.85 | −0.044 *** | −2.63 | 6.812 *** | 7.05 |
YEAR/IND | YES | YES | YES | |||
AF | YES | YES | YES | |||
Observations | 19745 | 19745 | 21375 | |||
Adj R2/Pse R2 | 0.099 | 0.071 | 0.054 | |||
F/Chi2 | 20.694 *** | 13.536 *** | 691.146 *** |
© 2019 by the authors. Licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (http://creativecommons.org/licenses/by/4.0/).
Share and Cite
Hou, F.; Liao, F.; Liu, J.; Xiong, H. Signing Auditors’ Foreign Experience and Debt Financing Costs: Evidence for Sustainability of Chinese Listed Companies. Sustainability 2019, 11, 6615. https://doi.org/10.3390/su11236615
Hou F, Liao F, Liu J, Xiong H. Signing Auditors’ Foreign Experience and Debt Financing Costs: Evidence for Sustainability of Chinese Listed Companies. Sustainability. 2019; 11(23):6615. https://doi.org/10.3390/su11236615
Chicago/Turabian StyleHou, Fei, Fangnan Liao, Jie Liu, and Hao Xiong. 2019. "Signing Auditors’ Foreign Experience and Debt Financing Costs: Evidence for Sustainability of Chinese Listed Companies" Sustainability 11, no. 23: 6615. https://doi.org/10.3390/su11236615