Audit Quality,ESG Disclosure And Corporate Investment Efficiency

Corporate investment,as one of the important factors driving economic development,has a significant impact on both the high-quality development of China’s economy and the sustainable development of enterprises.However,inefficient investment is currently prevalent in listed companies,mainly due to information asymmetry and agency problems.The signaling and supervisory role of external audit can inhibit inefficient investment.In addition,during the 14 th Five-Year Plan period,green,low-carbon and innovation are both requirements and opportunities for development.The ESG concept of environment,social responsibility and corporate governance is in line with the requirements of green,low-carbon and innovation,therefore,the high-quality development of China’s economy is driven by the ESG concept.The non-financial information disclosed by ESG has gradually become the focus of stakeholders’ attention,and high-quality external audit can improve the transparency of non-financial information disclosure of corporate ESG through the monitoring mechanism,thus weakening the information asymmetry between enterprises and stakeholders in the non-financial dimension,enabling companies to improve their investment efficiency and rational allocation of resources,and promoting sustainable development.Therefore,based on the current study,this paper firstly explores whether audit quality has a negative relationship with inefficient investment,and secondly investigates whether ESG disclosure can play a mediating role in the path of audit quality on inefficient investment,i.e.whether the high quality external audit pursued by firms can enhance the transparency of ESG disclosure,and thus reduce the level of information asymmetry among stakeholders through non-financial information disclosed by ESG,resulting in more efficient corporate investment.This paper argues the research hypothesis by using OLS regression method and mediation test model.A total of 8,769 samples of 1000 A-share listed companies from 2011-2020 were selected for the study.The international Big4 was used to measure audit quality,Bloomberg’s ESG disclosure score was chosen as a measure of ESG disclosure transparency,and the measure of corporate inefficient investment was labelled as the absolute value of the residuals measured by the Biddle model.Finally,relevant recommendations are made on the findings of the study.The results of the study found a negative relationship between audit quality and inefficient investment,and further sub-sample studies showed that high quality external audits can discourage over-investment and mitigate under-investment.Second,there is a positive relationship between audit quality and ESG disclosure,i.e.,high-quality external audits can enhance the transparency of ESG disclosure.In addition,ESG disclosure plays a mediating role in the process of audit quality in curbing inefficient investment.Finally,in further analysis,it is shown that ESG disclosure plays a fully mediating role in the effect of audit quality and over-investment,and a partially mediating role in the effect of audit quality and under-investment.Subsequently,the role played by audit quality,and thus the impact of ESG disclosure,differs across the nature of property rights.