Government shareholding and information verification costs: evidence from audit pricing

We examine whether direct government equity purchases affect firms’ information verification costs, proxied by audit fees. Using a propensity-score-matched difference-in-differences design around China’s 2015 ‘National Team’ intervention, we find a significant decline in audit fees for treated firms. Mechanism tests support a signalling channel driven by favourable market sentiment, and a governance channel characterized by higher disclosure quality, greater institutional ownership, and fewer internal control deficiencies. The effect is more pronounced for non-SOEs and holds across a battery of robustness checks.