Signing auditors' cultural background and debt financing costs |
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| Institution: | 1. School of Business, Qingdao University, Qingdao 266100, Shandong province, China;2. School of Economics and Management, North China Electric Power University, Beijing 102206, China;3. School of Accounting, Guizhou University of Finance and Economics, Guiyang 550025, Guizhou province, China;1. Audencia Business School, Research Center: Markets Technology and Society, 8 Route de la Joneliere, 44312 Cedex 3, Nantes, France;2. Heriot Watt University, Accounting, Economics and Finance SEEC, CFI, Edinburgh, Scotland EH14 4AS, UK;1. Department of Risk Management and Insurance, Tamkang University, Taiwan, 151, Yingzhuan Rd., Tamsui Dist., New Taipei City 25137, Taiwan;2. Department of Risk Management and Insurance, Research Fellow, Risk and Insurance Research Center, College of Commerce, National Chengchi University, Taiwan, 64, Sec. 2, Zhi-Nan Road, Wen-Shan District, Taipei 11605, Taiwan;1. School of Accounting, Finance and Economics, De Montfort University, LE1 9BH, UK;2. Department of Accounting and Finance, Edinburgh Napier University, UK |
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| Abstract: | This study explores the effect of signing auditors' cultural background on debt financing costs. Using a sample of Chinese listed firms from 2007 to 2019, we find a negative association between signing auditors of Confucian origin and the cost of debt, indicating that signing auditors who grow up in strong Confucian atmospheres increase perceptions of audit quality. Furthermore, empirical results show that signing auditors of Confucian origin enhance accounting information quality. Meanwhile, these signing auditors can obtain high audit fees, attract more clients, and are more likely to be selected by client firms when changing auditors. Additional tests document that signing auditors' gender, education level, and working experience attenuate the negative relationships between signing auditors' Confucian background and debt financing costs. The negative effect of signing auditors' cultural background on debt financing costs is more pronounced in non-state-owned firms and firms with less analyst coverage. This paper extends the literature about the influencing factors of financing costs and provides insights into the economic consequence of culture. |
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