Social trust and audit report lag: the roles of internal control quality and financial misconduct

Drawing from institutional theory, this study investigates the impact of social trust, an informal institutional element, on audit report lag (ARL). This theory underscores the pivotal role of informal institutions in shaping organizational practices, but the impact of these factors on ARL remains underexplored. We address this gap by examining the role of social trust as a regional determinant of ARL. Based on a sample of Chinese A-share listed companies for the period 2010–2020, our findings indicate that higher levels of social trust are associated with shorter ARL, demonstrating that it significantly enhances the timeliness of financial reporting. In addition, social trust reduces ARL by improving internal control quality and minimizing financial misconduct. Further analysis reveals that the negative effect of social trust on ARL is more pronounced in firms that adopt International Financial Reporting Standards and operate in high-marketization regions. The robustness of these results is confirmed through various alternative proxies, endogeneity checks and temporal variations. This research contributes to the literature by integrating informal institutional factors into the ARL framework, providing valuable insights for policymakers and practitioners to enhance financial reporting practices.