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  1. Home
  3. The Nonlinear Impact Of Esg Performance On Audit Pricing: Evidence From China.
  1. Home
  3. The Nonlinear Impact Of Esg Performance On Audit Pricing: Evidence From China.

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

Yajin Li1, Fei Meng2

  • 1Accounting School, Capital University of Economics and Business, Beijing, China.

Plos One
|September 4, 2025

View abstract on PubMed

Summary
This summary is machine-generated.

Corporate Environmental, Social, and Governance (ESG) performance shows a U-shaped effect on audit pricing. Strong ESG practices initially lower audit fees, but the benefit plateaus with further improvements, influenced by internal controls and information asymmetry.

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Area of Science:

  • Accounting and Auditing
  • Corporate Social Responsibility
  • Financial Economics

Background:

  • Growing importance of Environmental, Social, and Governance (ESG) performance in corporate strategy.
  • Limited understanding of the non-financial impact of ESG on traditional financial metrics like audit pricing.
  • External auditors' role in assessing corporate accountability and risk.

Purpose of the Study:

  • To investigate the non-linear relationship between corporate ESG performance and audit pricing.
  • To examine the moderating effects of internal control quality and information asymmetry on this relationship.
  • To explore the underlying mechanisms through which ESG performance affects audit fees.

Main Methods:

  • Empirical analysis of Chinese-listed companies from 2011 to 2021.
  • Econometric modeling to test the U-shaped relationship between ESG performance and audit pricing.
  • Moderation and mediation analyses to identify the roles of internal controls, information asymmetry, and risk mitigation.

    • Main Results:

    • A significant U-shaped relationship was found between ESG performance and audit pricing.
    • Audit pricing decreases with improved ESG performance up to a threshold, after which the effect diminishes.
    • Higher internal control quality and lower information asymmetry flatten the U-shaped curve.

    Conclusions:

    • Corporate ESG performance has a complex, non-linear impact on audit pricing.
    • ESG initiatives can reduce audit costs by mitigating financial and operational risks.
    • Findings provide insights for companies to optimize ESG strategies for audit fee efficiency.