This study aims to examine the impact of peer Management Discussion and Analysis (hereafter referred to as MD&A) risk information disclosure on the corporate audit demand.
Ordinary least square is used to analyze data for firms listed on China’s A-share market from 2011 to 2021.
The study finds that peer MD&A risk information disclosure significantly increases the demand for audits, manifested by the increase of hiring experienced auditors’ and increased audit fees, exhibiting a positive spillover effect. The mechanism test results show that peer MD&A risk information disclosure promotes corporate audit demand by increasing the perception of corporate business risk, investor attention and industry competitive pressure, thereby incentivizing companies to opt for high-quality audit services. The results of moderating effect test indicate that accounting information comparability, analyst attention and institutional investor ownership significantly enhance the positive spillover effect of peer MD&A risk information disclosure on corporate audit demand. Moreover, peer MD&A risk information disclosure improves audit quality, as reflected in reduced earnings management. Corporate audit demand can play an intermediary role in this relationship.
This study not only enriches the research in the fields of risk information disclosure and auditing but also provides a reference for information users to understand nonfinancial information disclosure. It suggests that the government should enhance the scrutiny and regulation of the quality of nonfinancial information disclosure by listed companies, creating a favorable market information environment and promoting the sustainable development of the capital market.
This study provides new evidence demonstrating that strengthening and improving the nonfinancial information disclosure plays an important role in promoting audit practices, enhancing the transparency and standardization of capital markets and achieving long-term sustainable development goals.
This study innovatively explores the relationship between MD&A risk information disclosure, corporate audit demand and sustainable development. Based on this exploration, we propose policy recommendations emphasizing the need for regulatory authorities to strengthen oversight of nonfinancial information disclosure. This would promote audit practices and market transparency, thereby supporting the achievement of sustainable development goals.
