Audit Pricing Effects of the Short-selling Mechanism: Evidence from China
DOI:
https://doi.org/10.54691/m8h61z25Keywords:
Short-selling Deregulation; Audit Fees; Internal Control Quality; Ownership Structure; Difference-in-Differences.Abstract
This paper analyzes whether easing short-sale restrictions changes the audit fees paid by Chinese listed companies. Using main-board A-share companies traded on the Shanghai and Shenzhen exchanges over 2013-2023 and treating the stepwise enlargement of the margin-financing and securities-lending program as an exogenous policy shock, the analysis estimates a difference-in-differences specification to evaluate how short-sale eligibility is reflected in audit pricing. The results show that firms granted short-selling eligibility face significantly higher audit fees, and this pattern is unchanged after multiple robustness exercises. Heterogeneity analyses further show that firms granted short-selling eligibility are associated with higher audit fees. By linking capital-market reform to auditor pricing decisions, this paper extends research on the economic consequences of short selling, clarifies how external market discipline reshapes auditors’ risk assessment, and provides empirical evidence for regulators, listed firms, and accounting firms.
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