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Social security contributions, financing constraints and demand for higher audit quality-evidence from China

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  • Yu Haizong
  • Zhu Huijuan
  • Xia Changyuan

Abstract

This paper discusses the impact and mechanism of corporate social security contributions on the demand for higher audit quality. The study finds that social security contributions increase high-quality audit demand of firms. The mechanism is found to be that social security contributions motivate firms to raise capital by increasing financing constraints, and then firms choose high-quality audit services to strive for financing. Heterogeneity analysis shows that the impact of social security contributions on the demand for higher audit quality is more significant in non-state-owned firms and firms with higher labour intensity. The above findings respond to audit demand signalling theory in terms of theoretical and empirical data and provide thinking for better understanding the effects of social security contributions.

Suggested Citation

  • Yu Haizong & Zhu Huijuan & Xia Changyuan, 2023. "Social security contributions, financing constraints and demand for higher audit quality-evidence from China," Applied Economics Letters, Taylor & Francis Journals, vol. 30(14), pages 1918-1922, August.
    • Handle: RePEc:taf:apeclt:v:30:y:2023:i:14:p:1918-1922
    DOI: 10.1080/13504851.2022.2083565
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