The Inhibitory Effect of External Audit Quality on Corporate Information Disclosure Violations—An Empirical Test Based on A-Share Listed Companies

Abstract

Although information disclosure is crucial for capital market pricing efficiency and investor protection in recent years, the A-share market has still frequently exposed cases of financial fraud, false statements and other violations, and the market order and investors' trust have been damaged to varying degrees. Against this background, how to effectively curb corporate violations through external governance mechanisms has become an important issue. As a key external supervision force, independent audit plays an irreplaceable role in defense in preventing corporate compliance risks. For the 2015–2024 period, this paper examined A-share listed firms, measuring audit quality by the receipt of standard unqualified opinions and estimating the impact on disclosure violations through logit and probit regressions. This paper finds that the higher the audit quality, the lower the possibility of information disclosure violations. This is mainly because strict audit procedures can restrain opportunistic management behavior, thereby reducing the risk of violations. After controlling for fixed characteristics at the annual and industrial levels and re-estimating with a probit model, this result has not changed. This study enriches the relevant literature of external corporate governance, and provides empirical evidence for regulatory authorities to optimize differentiated inspection strategies and investors to assess the risk of corporate violations.