Wang, Litan, You, Kefei ORCID: 0000-0001-7253-5838 and Chen, Hui (2024) Financial investment by non-financial firms: does it affect audit quality? Journal of Management and Governance. ISSN 1385-3457 (Print), 1572-963X (Online) (doi:https://doi.org/10.1007/s10997-024-09714-y)

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Abstract

In the context of the global trend of increasing financial investment by non-financial firms, this study investigates how this process affects the audit quality of these firms. Employing data of Chinese listed non-financial firms from 2011 to 2020, we first examine whether the increasing proportion of financial assets in the total assets has an adverse impact on the audit quality of these firms. We then analyze the mediation effect of operational volatility on such impact by adopting the mediation test of the modified Sobel’s z and the bootstrap test. We find that a higher proportion of financial assets to total assets lowers the audit quality, confirming that the financialization of non-financial firms deteriorates their audit quality. Furthermore, the mediation tests show that operational volatility is an important channel for this negative effect.

Item Type:	Article
Uncontrolled Keywords:	financial investment, audit quality, financialization, state ownership, big 4 and non-big 4
Subjects:	H Social Sciences > HB Economic Theory H Social Sciences > HG Finance
Faculty / School / Research Centre / Research Group:	Greenwich Business School Greenwich Business School > Political Economy, Governance, Finance and Accountability (PEGFA) Greenwich Business School > School of Accounting, Finance and Economics
Last Modified:	19 Aug 2024 15:44
URI:	http://gala.gre.ac.uk/id/eprint/47718

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