Key audit matter disclosure and stock mispricing: Evidence from China

Wenzhen Li and Xiaoyu Zheng

Finance Research Letters, 2024, vol. 67, issue PB

Abstract: Stock mispricing refers to the situation where the stock price of a firm diverges from its intrinsic value, which can impair market resource allocation efficiency and hinder the healthy development of the capital market. This study aims to investigate the influence of key audit matters (KAM) disclosure on stock mispricing. Using a firm-level panel dataset from 2017 to 2022, we demonstrate that KAM disclosure can significantly reduce stock mispricing. This effect is achieved by mitigating information inefficiency and discouraging market speculation. Heterogeneity analysis reveals a more pronounced impact in firms with poor audit quality and deficient internal control systems.

Keywords: Key audit matters; Stock mispricing; Asset pricing (search for similar items in EconPapers)
JEL-codes: G12 M42 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:67:y:2024:i:pb:s1544612324008730

DOI: 10.1016/j.frl.2024.105843

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