The Impact of Auditor Switch on Private Sector’s Financial Constraints during the Implementation of the PPP Contract: Empirical Analysis Based on PSM-DID Model

Abstract

Government intervention is the primary reason for the failure of PPP projects in China. Therefore, project implementing agencies should “loosen the shackle” of social capital or project companies (private sector), so as to give full play to their subjective initiative and innovative spirit. Practically, however, the winning of the social capital or the project company in the implementation of the PPP will tend to take opportunism behaviour in order to increase their income, resulting in the phenomenon of “the winner’s curse”, so the project implementing agencies still need through inspection, testing, auditing, and other ways to supervise and control the social capital or the project company. Based on the above research background, It will be of great significance to explore the impact of auditor changes on the subsequent financing constraints of the private sector during the implementation of PPP contracts. Using data from listed companies participating in PPP project construction from 2000 to 2017, through the PSM-DID model, we find that: After eliminating the selectivity bias, auditor changes result in additional costs of debt; Audit opinion shopping, accompanied by auditor changes, makes listed companies face greater debt financing constraints during the implementation of the PPP contract. The results of this study enrich the research on the influence factors of corporate financial constraints and the corporate governance mechanisms of audit market, and reveal the effectiveness of audit supervision in PPP mode to improve project management efficiency and project operation.