Regular fiscal and accounting supervision and firms’ cost of equity capital: evidence from a quasi-natural experiment using the pilot reform to strengthen fiscal and accounting supervision

Fiscal and accounting supervision has become an integral part of China’s Party and state supervisory system. Using Chinese A-share listed firms from 2017 to 2022, this study exploits the Ministry of Finance’s 2020 pilot reform to strengthen fiscal and accounting supervision as a quasi-natural experiment to examine its impact on firms’ cost of equity capital. The results show that the reform significantly reduces the cost of equity through information governance, behavioural guidance and expectations management. The effect is stronger among firms with higher retail ownership, no foreign shareholders, smaller size and non-state ownership. Further analysis reveals that the reform also increases firm value. These findings highlight the role of fiscal and accounting supervision in improving accounting information quality, alleviating corporate financing costs and promoting high-quality economic development.