The nonlinear impact of ESG performance on audit pricing: Evidence from China

Yajin Li and Fei Meng

PLOS ONE, 2025, vol. 20, issue 9, 1-19

Abstract: The substantial impact of corporate Environmental, Social, and Governance (ESG) performance, predominantly measured by non-financial metrics, on external auditors is investigated in this paper. Using a sample of Chinese-listed companies from 2011 to 2021, we examine how auditors respond to corporate ESG performance from the perspective of audit pricing. The findings reveal a U-shaped, non-linear relationship between corporate ESG performance and audit pricing. Enhancing ESG performance significantly reduces audit pricing up to a certain threshold, but the impact diminishes as performance continues to improve. Internal control quality and the degree of information asymmetry play pivotal moderating roles within this U-shaped relationship; higher-quality internal controls and lower information asymmetry contribute to flattening the U-shaped curve. Mechanism analysis illustrates that ESG performance influences audit pricing by mitigating financial and operational risks. This paper supplements the understanding of ESG’s impact on audit pricing from a non-linear perspective, offering valuable insights for companies actively engaged in ESG practices.

Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:plo:pone00:0331504

DOI: 10.1371/journal.pone.0331504

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