Short-selling Pressure and Auditors' Attention to Key Audit Matters

DOI: https://doi.org/10.62517/jse.202511417

Author(s)

Yiwen Wang

Affiliation(s)

Tianjin University of Finance and Economics, Tianjin, China *Corresponding Author

Abstract

Against the backdrop of China's 2017 new audit standards, this study samples non-financial A-share firms from 2017-2023. Using the difference-in-differences model, it explores short-selling's impact on key audit matter disclosure. Higher disclosure quality means more auditor attention. Results show short-selling, through market supervision, significantly improves disclosure quality. Heterogeneity tests show that firms' accounting conservatism and auditor reputation affect short-selling's effectiveness. In low-conservatism firms, short-selling pressure makes disclosure more cautious, with a greater improvement. In non-"Big Four"-audited firms, short-selling pressure spurs them to boost credibility and market recognition by enhancing disclosure, so short-selling has a more prominent impact. From an auditor's perspective, this study analyzes short-selling's key role in improving disclosure. Thus, liberalizing short-selling and refining relevant systems can fully leverage its corporate governance role in China's capital market.

Keywords

Short Selling; Key Audit Matters; Information Disclosure

References

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