The impact of biodiversity regulation on audit pricing − A quasi-natural experiment based on the Green Shield Program

Abstract

We examine regulatory risks under biodiversity conservation policy and use a difference-in-differences (DID) model to assess the Green Shield Program's (GSP) impact on enterprise audit pricing. We find that biodiversity regulations increase audit pricing for nature reserve enterprises, with policy effects strengthening over time. Mechanism tests confirm risk disclosure and contagion channels explain this trend. Further analysis excludes "economic correlation collusion" and "firewall risk isolation" as drivers of risk premiums, indicating auditors appropriately compensate for biodiversity regulatory risks. Additionally, GSP boosts the total factor productivity and green total factor productivity of enterprises in nature reserves, supporting the Porter hypothesis. We provide insights into achieving the Porter effect through regulation and offer guidance for implementing the Kunming-Montreal Global Biodiversity Framework.