A Study of the Relationship between Short-Selling and Audit Quality

Abstract

This paper utilizes a least squares method to discover the influence of the short-selling mechanism implementation on audit quality, based on a sample of A-share listed companies from 2010 to 2022. It finds that the implementation of the short-selling mechanism encourages auditors to enhance audit quality. Further analysis reveals that the short-selling mechanism has a stronger impact on improving the audit quality of privately held businesses and those with a lower level of corporate governance. The paper’s conclusions offer empirical support for China’s full implementation of the shorting mechanism and the improvement of audit quality. The research findings also enrich the research on this topic in the field of auditing.