Purpose This study aims to examine whether audit committee (AC) attributes are associated with the extent of climate risk disclosure in mandated US annual reports, distinguishing between physical- and transition-risk discussion in 10-K Item 1A (Risk Factors). Design/methodology/approach Using S&P 500 firms, the study extracts Item 1A from 10-K filings and applies a transformer-based NLP classifier (ClimateBERT) to score firm-year physical- and transition-risk disclosure. Multiple regression models and alternative proxies are used to test the robustness of results. Findings The results show that AC independence, gender diversity and expertise are associated with higher physical- and transition-risk disclosure, consistent with stronger monitoring and closer review of climate-related narratives in 10-K filings. Longer committee tenure is linked to lower disclosure, suggesting that familiarity with management may soften scrutiny over time. The presence of an AC is also associated with higher disclosure. These results are stronger in carbon-intensive sectors and remain stable across multiple robustness tests. Research limitations/implications The study is limited to large US non-financial firms (S&P 500), which may restrict generalizability. The dependent variables are disclosure-based measures derived from textual classification of Item 1A and reflect how risks are communicated rather than underlying exposure. Practical implications Boards, AC chairs and investors can expect AC composition to shape the depth and clarity of climate-risk discussion in 10-K risk factors. Independence, gender mix and expertise are linked to fuller narratives that help users assess physical hazards and transition pressures. Regulators may also view AC features as part of the reporting system that helps explain cross-firm differences in climate-risk communication under a common US regime. Originality/value The study connects AC design to climate-risk disclosure in Form 10-K filings by using transformer-based text analytics that separate physical from transition risk within Item 1A. This provides fresh evidence on how reporting oversight relates to emerging-risk narratives and offers a scalable method for governance–disclosure research.
Purpose This study aims to investigate whether government limited partners (LPs) incur higher management fee costs than private investors when participating in venture capital (VC) funds within China's Government Venture Capital Guiding Funds (GVCGFs) system. It also examines how aligning GVCGF policy objectives with VC fund managers' investment preferences can mitigate these costs, and whether these effects vary across organizational and regional contexts, providing insights into the fiscal efficiency of public capital deployment in VC markets. Design/methodology/approach A hand-collected sample of 127 VC funds established between 2010 and 2020 that received investment from Chinese listed companies is used to examine management fee terms disclosed in limited partnership agreements. Regression analyses are conducted to estimate the effect of GVCGF participation on management fees. Instrumental variable estimation is used to address endogeneity concerns, while robustness tests and heterogeneity analyses are conducted to assess the stability and boundary conditions of the results. Findings Government LPs incur significantly higher management fees during the investment period compared to private investors. This fee gap narrows when GVCGF policy objectives align more closely with VC managers' industry, stage and regional investment preferences, highlighting the role of alignment in improving the fiscal efficiency of public capital. Heterogeneity analyses further show that the fee gap is smaller for state-owned VC firms and in regions with lower levels of marketization. Originality/value This study shifts focus from performance outcomes to cost structures in government-backed VC, offering novel empirical evidence on management fee disparities in a major public VC setting. It further shows that management fees can reflect the monitoring and coordination costs associated with policy-constrained public capital. By identifying alignment between public objectives and market expertise as a key mechanism for cost reduction, the study provides practical guidance for improving fiscal efficiency and governance effectiveness in hybrid public-private investment models.
Purpose This study aims to investigate whether and why auditors are more likely to issue modified audit opinions (MAOs) to clients receiving negative news reports. Design/methodology/approach Exploiting a legal regime change in China in 2005 that significantly increased auditor litigation risk, the authors divide the sample period into two subperiods: the low litigation risk period (2001–2004) and the high litigation risk period (2006–2009). The authors manually read and code all newspapers to identify firm-years in which clients received negative press coverage. To address endogeneity and self-selection concerns, the authors use propensity score matching, instrumental variable estimation and Heckman’s two-stage model. Findings This study finds that auditors are more likely to issue MAOs to clients receiving negative news reports in the high litigation risk period. In particular, auditors’ MAOs are positively related to the first negative news reports, accounting-related negative press coverage and negative news reports from state-owned media in the high litigation risk period. Further analysis shows that negative news reports increase the probability of covered firms receiving regulatory sanctions or getting sued. As a strategic defense, auditors can reduce the probability of being sued and making litigation payments by issuing MAOs in the high litigation risk period. Originality/value To the best of the authors’ knowledge, this study is the first to provide comprehensive evidence in support of the strategic view and its implications (negative news reports increase the probability of covered firms getting sued and auditors can mitigate litigation risk by issuing MAOs).
Purpose This study aims to investigate how amplified fluctuations in supply and demand (the bullwhip effect) influence auditors’ risk assessments and pricing decisions. By examining whether operational instabilities spill over into external audit fees and disclosures, it aims to clarify the role of supply chain volatility as a key determinant in the audit environment. Design/methodology/approach Drawing on a large sample of Chinese listed firms, the authors construct firm-specific measures of the bullwhip effect by calculating the ratio of the volatility of production to the volatility of demand. These measures are then merged with annual audit-fee data and textual analyses of key audit matters (KAM) in audit reports. A quasi-natural experiment exploiting China’s intelligent supply chain policy is used to address potential endogeneity. Findings The results show that heightened supply–demand imbalances are significantly associated with higher audit fees, indicating that auditors perceive and price in this operational volatility as engagement risk. The findings also reveal that, under more pronounced bullwhip distortions, auditors devote greater attention to supply chain–related disclosures in the KAM section, suggesting that operational risks now occupy a central place in external assurance considerations. Originality/value By integrating a critical operational factor into traditional audit fee models, this study broadens the understanding of how real-side inefficiencies shape external assurance costs and disclosures. The evidence underscores the importance of supply chain dynamics in auditors’ risk evaluations and highlights how policy interventions aimed at stabilizing supply chain operations can mitigate upstream auditing expenses and informational frictions.
Purpose This paper aims to explore the significance of quarterly report lag as a potential indicator of firms’ annual reporting timeliness and internal control issues, informing policymakers about the incremental value of quarterly reports beyond other well-documented attributes. Design/methodology/approach Following Blankley et al. (2014), the authors use a two-stage approach to estimate a quarterly lag model and then examine the incremental information embedded in the unexplained (abnormal) component of quarterly report lag (AQRL). Findings Based on a sample of the US firms from 2007 to 2023, the authors find that AQRL predicts annual report lag and positively relates to the likelihood of internal control weaknesses. Additional analysis shows that the informational value of AQRL is mainly concentrated among the firms with Big 4 auditors, suggesting that quarterly reporting delays are more informative when audit processes are more standardized and stringent. Originality/value This study responds to the call by Kajüter et al. (2022) that researchers should investigate the impact of quarterly reports on “the time needed to perform the annual audit,” contributing to both interim financial reporting and reporting timeliness literature streams. While prior research mainly focuses on the frequency, content and assurance of quarterly financial reporting, the authors concentrate on the timeliness aspect that conveys useful information about the auditor, the client and the reporting process.
