Abstract:Using A-share listed companies from 2007 to 2017 as a sample, this paper studies the relationship between audit quality and capital market mispricing. The result shows that audit quality has a significant inhibiting effect on capital market mispricing, which implies that the higher the audit quality, the less extent the mispricing. Besides, audit quality decreases mispricing mainly via decreasing earnings management of firms and increasing investor attention. The further analyses show that the inhibiting effect of audit quality on capital mispricing mainly exists in firms with overvalued stocks and poor liquidity. This study expands the research on function of audit quality from the perspective of capital market pricing efficiency, which is of great importance to the capital market supervision.