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Audit risk and green innovation in SMEs

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  • Yang, Daoxiang
  • Jiao, Xuyang
  • Liao, Wenjiu

Abstract

Although audit risk is important for corporate sustainability, its relationship with sustainable practices in small- and medium-sized enterprises (SMEs) remains understudied. This study examines how audit risk affects green innovation in SMEs, with digitalization and managerial ability as moderating factors. Analysis of panel data from Chinese SMEs (2011–2021) shows that audit risk negatively impacts green innovation. However, advanced digital capabilities and skilled management mitigate this effect. Our findings vary based on ownership types and industry pollution levels, offering insights for policymakers and practitioners to promote sustainable practices through risk-aware strategies.

Suggested Citation

  • Yang, Daoxiang & Jiao, Xuyang & Liao, Wenjiu, 2025. "Audit risk and green innovation in SMEs," Finance Research Letters, Elsevier, vol. 76(C).
    • Handle: RePEc:eee:finlet:v:76:y:2025:i:c:s1544612325002429
    DOI: 10.1016/j.frl.2025.106978
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    1. Hong Ji & Xin Zeng & Fengxiu Zhou, 2025. "Intelligent Manufacturing and Green Innovation Efficiency: Perspective on the Agglomeration Effect," Sustainability, MDPI, vol. 17(11), pages 1-27, May.

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    Keywords

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    JEL classification:

    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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