IDEAS home Printed from https://ideas.repec.org/a/eee/finlet/v70y2024ics1544612324013618.html
   My bibliography  Save this article

Who really cares? Climate change exposure and auditor conservatism: Evidence from China

Author

Listed:
  • Yang, Chao
  • Song, Di

Abstract

This study examines the association between climate change exposure and auditor conservatism, indicating that firms with high climate change exposure demonstrate a higher level of auditor conservatism. The mechanism analysis reveals that climate change exposure reinforces auditor conservatism partly through the combined effects of earnings management and investor sentiment. Multiple robustness checks confirm the validity of main results. Given the growing interest in climate change and its associated risks in both practice and research, as well as the expected increasing significance of these risks, our findings are timely to a broad audience, including investors, regulators, auditors, managers, and scholars.

Suggested Citation

  • Yang, Chao & Song, Di, 2024. "Who really cares? Climate change exposure and auditor conservatism: Evidence from China," Finance Research Letters, Elsevier, vol. 70(C).
    • Handle: RePEc:eee:finlet:v:70:y:2024:i:c:s1544612324013618
    DOI: 10.1016/j.frl.2024.106332
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1544612324013618
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.frl.2024.106332?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Zacharias Sautner & Laurence Van Lent & Grigory Vilkov & Ruishen Zhang, 2023. "Firm‐Level Climate Change Exposure," Journal of Finance, American Finance Association, vol. 78(3), pages 1449-1498, June.
    2. Marshall Burke & Solomon M. Hsiang & Edward Miguel, 2015. "Global non-linear effect of temperature on economic production," Nature, Nature, vol. 527(7577), pages 235-239, November.
    3. Ferdous, Lutfa Tilat & Atawnah, Nader & Yeboah, Richard & Zhou, Yifan, 2024. "Firm-level climate risk and accounting conservatism: International evidence," International Review of Financial Analysis, Elsevier, vol. 95(PC).
    4. repec:cdl:econwp:qt3g72r0zv is not listed on IDEAS
    5. Joseph V. Carcello & Dana R. Hermanson & Terry L. Neal & Richard A. Riley, 2002. "Board Characteristics and Audit Fees," Contemporary Accounting Research, John Wiley & Sons, vol. 19(3), pages 365-384, September.
    6. Palmrose, Zv, 1986. "Audit Fees And Auditor Size - Further Evidence," Journal of Accounting Research, John Wiley & Sons, Ltd., vol. 24(1), pages 97-110.
    7. Yang, Xin & Wei, Luohan & Deng, Rantian & Cao, Jie & Huang, Chuangxia, 2023. "Can climate-related risks increase audit fees?–Evidence from China," Finance Research Letters, Elsevier, vol. 57(C).
    8. Trinh, Vu Quang & Trinh, Hai Hong & Nguyen, Thi Hong Hanh & Vo, Xuan Vinh, 2023. "Board gender diversity and firm-level climate change exposure: A global perspective," Finance Research Letters, Elsevier, vol. 55(PB).
    9. Timothy B. Bell & Rajib Doogar & Ira Solomon, 2008. "Audit Labor Usage and Fees under Business Risk Auditing," Journal of Accounting Research, John Wiley & Sons, Ltd., vol. 46(4), pages 729-760, September.
    10. Yang, Chao & Song, Di & Su, Yuhan, 2024. "The Low-carbon city pilot policy and trade credit financing: Evidence from China," Finance Research Letters, Elsevier, vol. 66(C).
    11. Lasse Niemi & W. Robert Knechel & Hannu Ojala & Jill Collis, 2018. "Responsiveness of Auditors to the Audit Risk Standards: Unique Evidence from Big 4 Audit Firms," Accounting in Europe, Taylor & Francis Journals, vol. 15(1), pages 33-54, January.
    12. Choi, Sanghak, 2024. "Climate change exposure and the use of short-term debt," Finance Research Letters, Elsevier, vol. 65(C).
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Abdesslem, Rim Ben & Chkir, Imed & Saadi, Samir, 2025. "Earning quality and climate risk: The case of European firms," International Review of Financial Analysis, Elsevier, vol. 102(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hao, Jie & Pham, Viet Tuan, 2024. "Stuck in traffic: Do auditors price traffic congestion?," The British Accounting Review, Elsevier, vol. 56(2).
    2. Ghafran, Chaudhry & O'Sullivan, Noel, 2017. "The impact of audit committee expertise on audit quality: Evidence from UK audit fees," The British Accounting Review, Elsevier, vol. 49(6), pages 578-593.
    3. Nurul Nazlia Jamil, 2020. "The Power of Political Connections: Review on the Impacts of Audit Committee and Corporate Governance," Journal of Public Administration and Governance, Macrothink Institute, vol. 10(1), pages 333347-3333, December.
    4. Bhuiyan, Md. Borhan Uddin & Rahman, Asheq & Sultana, Nigar, 2020. "Female tainted directors, financial reporting quality and audit fees," Journal of Contemporary Accounting and Economics, Elsevier, vol. 16(2).
    5. Ongsakul, Viput & Papangkorn, Suwongrat & Jiraporn, Pornsit, 2023. "Estimating the effect of climate change exposure on firm value using climate policy uncertainty: A text-based approach," Journal of Behavioral and Experimental Finance, Elsevier, vol. 40(C).
    6. Chahine, Salim & Filatotchev, Igor, 2011. "The effects of corporate governance and audit and non-audit fees on IPO Value," The British Accounting Review, Elsevier, vol. 43(3), pages 155-172.
    7. Sang Cheol Lee & Jaewan Park & Mooweon Rhee & Yunkeun Lee, 2018. "Moderating Effects of Agency Problems and Monitoring Systems on the Relationship between Executive Stock Option and Audit Fees: Evidence from Korea," Sustainability, MDPI, vol. 10(11), pages 1-24, November.
    8. David C. Hay & W. Robert Knechel & Norman Wong, 2006. "Audit Fees: A Meta†analysis of the Effect of Supply and Demand Attributes," Contemporary Accounting Research, John Wiley & Sons, vol. 23(1), pages 141-191, March.
    9. Liu, Hao & Lin, Chuyin, 2023. "Climate change news risk and corporate bond returns in China," Finance Research Letters, Elsevier, vol. 58(PC).
    10. Anthony Moung Yin Chan & Guoping Liu & Jerry Sun, 2013. "Independent audit committee members’ board tenure and audit fees," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 53(4), pages 1129-1147, December.
    11. Trinh, Vu Quang & Nguyen, Nga & Le, Phuong & Nguyen, Thao Ngoc, 2025. "Unraveling the ‘green-default paradox’: Assessing the influence of gender-diverse boards and socially responsible ratings," International Review of Financial Analysis, Elsevier, vol. 102(C).
    12. Timothy B. Bell & David B. Bryan, 2021. "Effectiveness, efficiency, and fee premiums in audits led by industry specialist partners," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(3), pages 4513-4572, September.
    13. He, Feng & Ren, Xingzi & Wang, Yueren & Lei, Xingfan, 2025. "Climate risk and corporate bond credit spreads," Journal of International Money and Finance, Elsevier, vol. 154(C).
    14. Asif M. Huq & Fredrik Hartwig & Niklas Rudholm, 2022. "Do audited firms have a lower cost of debt?," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 19(2), pages 153-175, June.
    15. Sami Ben Larbi & Eustache Ebondo Wa Mandzila & Jihene Meniaoui & Ernesto Tapia Moor, 2024. "The influence of auditor and auditee on mandatory audit fees in France," Revista Internacional de Gestión del Conocimiento y la Tecnología (GECONTEC), Revista Internacional de Gestión del Conocimiento y la Tecnología (GECONTEC), vol. 12(1), pages 77-102, April.
    16. Chen, Huimin (Amy) & Francis, Bill B. & Shen, Yinjie (Victor) & Wu, Qiang, 2024. "The impact of hedge fund activism on audit pricing," The British Accounting Review, Elsevier, vol. 56(2).
    17. Naseer, Mirza Muhammad & Guo, Yongsheng & Zhu, Xiaoxian, 2025. "When climate risk hits corporate value: The moderating role of financial constraints, flexibility, and innovation," Finance Research Letters, Elsevier, vol. 74(C).
    18. George Drogalas & Michail Nerantzidis & Dimitrios Mitskinis & Ioannis Tampakoudis, 2021. "The relationship between audit fees and audit committee characteristics: evidence from the Athens Stock Exchange," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 18(1), pages 24-41, March.
    19. Incheol Kim & Joon Ho Kong & Rong Yang, 2024. "The impact of board reforms on audit fees: International evidence," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 51(1-2), pages 45-83, January.
    20. Abdesslem, Rim Ben & Chkir, Imed & Saadi, Samir, 2025. "Earning quality and climate risk: The case of European firms," International Review of Financial Analysis, Elsevier, vol. 102(C).

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:finlet:v:70:y:2024:i:c:s1544612324013618. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/frl .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.