Green Transition and Information Verification Cost

This paper examines whether and how the green transition affects the information verification cost of firms in the high polluting industries. Utilizing the implementation of the Green Audit of Outgoing Officials (GAOO) policy in🔸快乐10分玩法说明, we find that audit fees of firms in the high polluting industries significantly decrease when the economy transits toward green. We provide supporting evidence for two channels: (1) Auditors rely on heightened governmental monitoring and reduce audit efforts, for a certain level of evidence; (2) Firms in high polluting industries improve environmental performance which leads to lower client risks, thus allowing for less audit evidence. Additional analysis shows that reduced audit fee was not accompanied by the deterioration in audit quality. Overall, our paper indicates that the green transition can reduce the information verification cost and facilitate information process, suggesting that the economic development model has a fundamental influence on the financial market.
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