Abstract: As an important external governance mechanism, high-quality audit can reduce investor's information risk and mitigate agency conflicts between insiders and investors. In turn, investors will ask for lower cost of capital for companies with higher auditor quality. Therefore, according to the information theory and agency theory, there is a correlation between audit and cost of equity. The existing literature has found that the characteristics of accounting firms, such as accounting firm's size or industry expertise, have negative impacts on the company's cost of equity. At the level of individual auditors, however, it is still unknown whether investors pay attention to the experience of signing auditors in pricing equity and adjust the cost of equity capital accordingly.
Using the data of A-share non-financial listed companies and their auditors, this paper measures signing auditor's general experience according to the cumulative number of audit reports issued by the signing auditor, and then explores the impact of the average experience of two signing auditors on the cost of equity capital. The results show that there is a significant negative correlation between the general experience of the signing auditors and the cost of equity after controlling the characteristics of the accounting firm. The above results suggest that investors will look at the level of experience of signing auditors and “reward” companies audited by experienced signing auditors in pricing equity. The authors use PSM, the entropy matching method, and two-stage residual method to alleviate the endogeneity concern, and run robustness tests by using alternative measures of the cost of equity and the experience of signing auditor and controlling other characteristics of the signing auditors. The results remain stable.
The results of mechanism tests show that experienced signing auditors can improve the company's accounting information quality, thereby reducing the cost of equity capital. The results of the heterogeneity tests show that the degree of information asymmetry (measured by the number of analyst followings and the complexity of the company's business) and two types of agency conflict, and the regional legal environment where the company is located can strengthen the effect of signing auditors' experience, while the signing auditor's client-specific experience (tenure) and accounting firm's size can weaken the effect of the signing auditor's experience. Specifically, the negative correlation between signing auditor's experience and the cost of equity capital is only significant in the companies with higher degree of information asymmetry and agency conflict, higher level of regional rule of the law, while the correlation is not significant in Big10 accounting firms or signing auditors with long tenure.
This paper contributes to the literature from the following aspects: Firstly, by exploring the relationship between signing auditor's experience and the cost of equity, this paper enriches the research on the relationship between audit and cost of equity capital from the perspective of individual auditor's experience. It also provides empirical evidence on the economic consequence of CPA's experience from the perspective of the cost of equity. Secondly, since the ex-ante cost of capital is also a measure of financial reporting quality from the perspective of investor's perception, this paper helps to understand the effect of individual auditor's experience on accounting information quality, and further, audit quality.
This study also has important practical implications. Firstly, by providing empirical evidence about the effect of signing auditor's experience on the cost of equity capital, this paper demonstrates the usefulness of disclosing relevant information of signing auditors to a certain extent and supporting the reform of improving audit transparency in China and Western countries. Secondly, the results of this study show that experienced signing auditors help to reduce the cost of capital which is beneficial for the company. Such results mean that the listed company can signal its quality and reduce the cost of equity capital by selecting experienced CPAs as signing auditors.

Key words: cost of equity, information risk, agency cost, audit quality, individual experience

摘要： 利用A股上市公司2008—2017年数据,考察了签字会计师个人经验对权益资本成本的影响。结果发现,在控制了会计师事务所特征等因素后,签字会计师的一般经验与公司权益资本成本呈显著负向关系,这表明,投资者在对权益进行定价时会关注签字会计师的个人经验。中介检验表明,签字会计师经验部分地通过会计信息质量影响权益资本成本。异质性检验表明,信息不对称和代理冲突程度、所在地区法治环境会强化签字会计师经验的作用,而签字会计师的客户特定经验(任期)和事务所规模会弱化签字会计师经验的作用。这一研究提供了签字会计师经验与权益成本之间关系的经验证据,有助于深化对审计师经验的作用及外部审计与权益融资之间关系的理解。

关键词: 权益资本成本, 信息风险, 代理成本, 审计质量, 个人经验