Modified audit opinions and debt contracting: evidence from China

Document Type

Article

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Please cite original article.

Keywords

audit opinons; debt contracting; government ownership; interest rate; debt maturity

Identifier Data

https://doi.org/10.1080/16081625.2018.1517048

Publisher

Taylor & Francis

Publication Source

Asia-Pacific Journal of Accounting & Economics

Abstract

We examine whether the type of audit opinion a company receives is associated with the debt characteristics of Chinese companies. Our analyses indicate that companies receiving modified audit opinions pay higher interest rates and have more short-term debt. When the auditor mentions going concern in the audit opinion, companies pay higher interest rates and have a lower percentage of long-term debt, but this result is weaker for state-owned enterprises. We also find that companies receiving qualified or adverse opinion pay higher interest rates and have a lower level of long-term debt as a percentage of total debt.

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