Financial-Market Infrastructure and Audit Fees: Evidence from the Shanghai Commercial Paper Exchange

Using the 2016 launch of the Shanghai Commercial Paper Exchange (SCPEX) as a quasi-natural experiment, we examine how financial-market infrastructure upgrades affect audit pricing. Employing a difference-in-differences approach, we find that audit fees decline significantly for listed firms with greater pre-reform reliance on commercial bills. The effect operates through three channels: easing firms’ liquidity constraints, enhancing the verifiability of bill-related information, and streamlining bill verification procedures. Cross-sectional analyses reveal stronger effects for high bill-risk firms and audit settings with weaker independent risk-identification ability or risk-disclosure incentives. Our findings indicate that infrastructure reforms reshape the audit market by altering auditors’ risk perceptions and effort allocation.