Corporate digital disclosure has become increasingly common, but digital narratives may not always be supported by observable digital investment. This study examines whether auditors price this narrative–substance mismatch. Using Chinese A-share listed firms from 2015 to 2024, I measure digital catering with a digital catering index, defined as the difference between normalized nominal digital disclosure and normalized actual digital investment. The results show that digital catering is positively associated with audit fees after controlling for firm characteristics, governance, auditor attributes, report length, business complexity, firm fixed effects, and year fixed effects. The economic magnitude is statistically detectable but modest: a one-standard-deviation increase in digital catering is associated with about 0.63% higher audit fees. Decomposition tests show that nominal digital disclosure is positively associated with audit fees, whereas actual digital investment is negatively associated with audit fees; the fee premium for nominal disclosure is stronger when actual investment is low. Mechanism-related analyses show that digital catering is associated with lower MD&A readability, more boilerplate disclosure, longer reporting lags, and higher future crash risk. The findings suggest that auditors price the mismatch between digital narratives and actual investment at the margin rather than digital disclosure itself.
Lifan Pang (Tue,) studied this question.