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Key audit matters and stock price synchronicity: Evidence from a quasi-natural experiment in China

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  • Zhai, Huayun
  • Lu, Meiting
  • Shan, Yaowen
  • Liu, Qingzhuo
  • Zhao, Ying

Abstract

The recent requirement to disclose key audit matters (KAMs) in audit reports aims to improve audit quality and provide extra information to external users. Using a quasi-natural experiment in China and the difference-in-differences approach, we document causal evidence that KAM disclosures provide incremental firm-specific information and reduce stock price synchronicity. The effect of KAM disclosures is more pronounced in firms with controlling shareholders and fewer institutional shareholders. Overall, the findings suggest that KAM disclosures reduce information acquisition costs and facilitate firm-specific information impounded in price, especially when such information is less accessible to outside shareholders.

Suggested Citation

  • Zhai, Huayun & Lu, Meiting & Shan, Yaowen & Liu, Qingzhuo & Zhao, Ying, 2021. "Key audit matters and stock price synchronicity: Evidence from a quasi-natural experiment in China," International Review of Financial Analysis, Elsevier, vol. 75(C).
    • Handle: RePEc:eee:finana:v:75:y:2021:i:c:s1057521921000892
    DOI: 10.1016/j.irfa.2021.101747
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    Cited by:

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    5. Maoli Ji & Yuguang Ji & Shulan Dong, 2022. "Environmental Accounting Information Disclosure Driving Factors: The Case of Listed Firms in China," Sustainability, MDPI, vol. 14(23), pages 1-23, November.
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    7. Xijia Huang & Yiting Guo & Yuming Lin & Liping Liu & Kai Yan, 2022. "Green Loans and Green Innovations: Evidence from China’s Equator Principles Banks," Sustainability, MDPI, vol. 14(20), pages 1-20, October.
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    10. Can Huang & Yuqiang Cao & Meiting Lu & Yaowen Shan & Yizhou Zhang, 2023. "Messages in online stock forums and stock price synchronicity: Evidence from China," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(3), pages 3011-3041, September.
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