The Timeliness and Consequences of Disseminating Public Information by Regulators

24 Pages Posted: 14 Apr 2011

See all articles by Michael Firth

Michael Firth

Lingnan University - Department of Finance and Insurance

Oliver M. Rui

China Europe International Business School (CEIBS)

Xi Wu

Central University of Finance and Economics (CUFE)

Date Written: April 11, 2011

Abstract

This paper documents different timeliness in disseminating sanction and enforcement information (SEI) by two types of regulatory agencies in China and the different consequences that flow from them. The China Securities Regulatory Commission (CSRC) does not make timely public disclosures of SEI and, instead, leave it up to the firms to make a public announcement under their general obligation to disclose price-sensitive information. The firms therefore have considerable discretion in deciding whether and when to disclose SEI. In contrast, the stock exchanges in Shenzhen and Shanghai make SEI public promptly through the media and the exchanges’ official websites. Using Chinese SEI data during the period 1999 to 2005, we find that the CSRC approach is associated with significantly lagged corporate disclosure (compared with the timely stock exchange approach) and a significantly negative (but delayed) stock price reaction. We also show that the sanctioned firm may take advantage of the less timely CSRC approach to delay its disclosure of SEI for opportunistic reasons such as completing material transactions. We conclude that the CSRC should make immediate public announcements of SEI as these contain price-sensitive information. Furthermore, the immediate dissemination of SEI will bring the CSRC into line with the disclosure practices of China’s stock exchanges and international market regulators.

Suggested Citation

Firth, Michael and Rui, Oliver M. and Wu, Xi, The Timeliness and Consequences of Disseminating Public Information by Regulators (April 11, 2011). Available at SSRN: https://ssrn.com/abstract=1806877 or http://dx.doi.org/10.2139/ssrn.1806877

Michael Firth

Lingnan University - Department of Finance and Insurance ( email )

Castle Peak Road
Tuen Mun, New Territories
Hong Kong
China
+852 2616 8160 (Phone)
+852 2466 4751 (Fax)

Oliver M. Rui (Contact Author)

China Europe International Business School (CEIBS) ( email )

699 Hong Feng Road
Pudong
Shanghai 201206
China
86-21-28905618 (Phone)
86-21-28905620 (Fax)

HOME PAGE: http://https://www.ceibs.edu/rui-oliver

Xi Wu

Central University of Finance and Economics (CUFE) ( email )

Beijing, Beijing
China

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