Does ESG performance reduce audit costs

Abstract

This paper explores the relationship between ESG performance and corporate audit fees based on the data of A-share listed companies in Shanghai and Shenzhen in China from 2010 to 2020. The results show that firms with higher ESG levels have lower audit fees, and this relationship is more significant in non-state enterprises. The impact mechanism test confirms that ESG performance affects the level of corporate audit fees mainly through two paths: reducing business risks and enhancing corporate reputation. The heterogeneity test shows that the suppressive effect of ESG on audit fees is more significant in firms whose audit firms are the "Big Four". The findings provide a theoretical basis for the study of the economic consequences of ESG and the factors influencing audit fees.