In Chan et al. (2012) paper, they hypothesize that there is a positive effect of rights-offering (delisting avoidance) incentives on managers' propensity to obtain favorable audit reports and this effect is strengthened when companies are controlled by local governments and audited by local auditors. The variable definitions and regression results are as follows:

Panel A: Regression Results (Dependent Variable is the Difference between Observed and Predicted Opinions) (1) (2) (3) Exp. Independent Variables Sign Coe IT. Z-stat. Coeff. Z-stat. Coeff. Z-stat. Incentive (a]) + 2.218 18.26** 2.127 17.20** 1.179 19.69* * Local (a2) 0.038 0.39 -0.049 -0.50 -0.003 -0.05 Incentive * Local (a3) 1.364 4.62* * 0.703 3.79* * Log of company total assets (a4) -0.169 -3.04** -0.147 -2.63* * Current assets over current liabilities (as) 0.075 1.28 0.094 1.58 0.050 1.27 Long-term debt over total equity (as) -0.781 -6.14** -0.804 -6.37*# Receivable and inventory over assets (a7) 0.978 2.74** 0.931 2.60* * Auditor switch (as) -0.359 -1.46 0.931 2.67** 0.005 0.06 Client listing age (ag) 0.029 1.83 0.029 1.81 0.019 2.26* Independent board members (@ 10) -0.101 -0.37 -0.071 -0.26 -0.077 -2.65** Institutional environment (@1 1) + 0.644 6.41** 0.644 6.38* * Pseudo R 14.05%* * 14.51%* * 17.64%** Sample size 4,874 4,874 4,874 Panel B: Impact Factor on the Propensity to Obtain a Better Opinion (Based on Column (2)) Local = 0 Local = 1 Incentive = 1 1 = 2.127 al + an + as = 3.442 Incentive = 0 a2 = -0.049 * ** Indicate statistical significance at the 5 percent and 1 percent levels, respectively. All p-values are one-tailed. Other variables are as defined in Table 2. Variable Definitions: Difference between observed and predicted opinions =1 for a better opinion, 0 for no difference in opinion, and -1 for a worse opinion; Incentive = 1 if the firm applies for rights offerings in one of the next 3 years or reports two consecutive years of losses, and 0 otherwise; Local = 1 if local SOEs choose a local auditor, and 0 otherwise; Auditor switch = 1 if the company switches its auditor in the current year, and 0 otherwise; Company listing age = number of years the company has been listed on the stock exchange; and Independent board members = ratio of independent board members to the total number of board directors