Understanding Public Enforcement of Securities Law in China: An Empirical Analysis of the Enforcement Outcomes of CSRC's Regional Offices

39 Pages Posted: 8 Feb 2017 Last revised: 1 Sep 2019

See all articles by Wenming Xu

Wenming Xu

School of Law and Economics, China University of Political Science and Law

Guangdong Xu

China University of Political Science and Law

Date Written: February 6, 2017

Abstract

This study examines the public enforcement (PE) of securities law in China. We exploit the external positive shock to enforcement intensity due to the reform decentralizing the authority to impose administrative sanctions (AS) and show that shares in the pilot project experience statistically significant, but economically insignificant, abnormal returns (AR). Furthermore, we examine the market reactions to PE actions against informational misconduct and find that shares receiving AS suffer an average AR of approximately -12.03% over the (-1,5) event window, whereas those receiving non-AS experience economically insignificant AR. Next, we investigate the impacts of PE actions on the external debt financing, and show a significant decrease in external debt financing associated with firms receiving AS compared to those receiving non-AS. Finally, for the subsample of shares sanctioned by ROs, we find that firm size significantly reduces the likelihood of receiving AS, but neither governmental ownership nor political participation matters.

Keywords: Controlled Firm; Event Study; Public Enforcement; Regional Offices; Securities Law; Stock Prices

JEL Classification: C31; K22; G38

Suggested Citation

Xu, Wenming and Xu, Guangdong, Understanding Public Enforcement of Securities Law in China: An Empirical Analysis of the Enforcement Outcomes of CSRC's Regional Offices (February 6, 2017). Available at SSRN: https://ssrn.com/abstract=2912606 or http://dx.doi.org/10.2139/ssrn.2912606

Wenming Xu (Contact Author)

School of Law and Economics, China University of Political Science and Law ( email )

25 Xitucheng Rd
Haidian District
Beijing
China

Guangdong Xu

China University of Political Science and Law ( email )

25 Xitucheng Rd
Haidian District
Beijing
China

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