The Effect of Maturity Mismatch between Investing and Financing on Audit Pricing

• 발행기관: 한국유통과학회
• 저자명: Hong YIN Ruo Nan ZHANG
• 간행물 정보: 『The Journal of Asian Finance, Economics and Business(JAFEB)』Vol. 7 No.9, 51~61쪽, 전체 11쪽
• 주제분류: 경제경영 > 경제학
• 파일형태: PDF
• 발행일자: 2020.09.30

영문 초록

This research investigates the consequences of the increase in corporate use of short-term debt in China over the past decades. Using a sample of Chinese firms from 2007 to 2018, we empirically explore the effect of corporate use of short-term debt for long-term investment (SFLI) on audit pricing. We first examine the relationship between SFLI and audit pricing for different groups of firms. Then, we investigate the role of the increase in short-term debt in alleviating principal-agent conflicts and reducing agency costs. We have four primary empirical findings. First, auditors tend to charge SFLI clients higher fees. Second, the negative relationship between SFLI and audit fee is found in private firms, firms audited by Chinese domestic auditors, and firms with higher information asymmetry. Third, the time auditors spent on SFLI clients is significantly more than that spent on non-SFLI clients, suggesting that the decrease in audit fee is not due to the decrease in cost. Fourth, SFLI significantly reduces the agency costs of the firm, which auditors regard as a low risk signal and grant an audit fee discount. Our findings suggest that the decrease in debt maturity, not only influences managerial behaviors, but also influences auditors’ risk assessment and pricing decisions.

목차

1. Introduction

2. Theoretical Framework

3. Research Design

4. Empirical Results

5. Conclusions

References

키워드

Maturity Mismatch SFLI Audit Risk Audit Pricing Agency Costs