The Information Role of Audit Opinions in Debt Contracting

Audit opinion as a kind of information can affect the decision of stakeholders. In this paper, I chose Chinese listed company data in the A-share market from 2010 to 2015 to make an empirical test for the information role of audit opinion in debt contracting. The results show that the audit opinion has a significant impact on debt contract. Compared with loans issued in the year after a clean opinion, loans in the year after a Modified Audit Opinion have higher costs, smaller scale and less long-term loans. Further, this paper compares the differences between state-owned enterprises and private enterprises, and finds that the information role of audit opinions in debt contracting is varying from different property right. The research conclusions provide empirical support for the decision usefulness of audit opinion information in lending market.