From Green Ideas to Green Savings: Assessing the Financial Impact of Green Innovations on Audit Fees

Abstract

Green innovation is an important approach to achieving ecologically sustainable development. However, the paradox surrounding enterprises’ willingness to engage in green innovation persists in discussions. Using a sample of listed firms from 2010–2021 in the Chinese A-shares market, this study analyzed the impact of green innovation diversity on audit fees and the underlying mechanisms involved. Our findings reveal that (1) a higher green innovation diversity is associated with a reduction in external audit fees; (2) green innovation diversity impacts audit fees through information transparency and corporate environmental performance; and (3) the effect of green innovation diversity on audit fees is more pronounced in firms with lower scales, higher government subsidies, and lower pollution intensity. These findings provide valuable insights into promoting firms’ engagement in green innovation activities and shed light on the challenges faced by audit firms when assessing and auditing green innovation.