The timeliness and consequences of disseminating public information by regulators
Document Type
Journal article
Source Publication
Journal of Accounting and Public Policy
Publication Date
3-1-2009
Volume
28
Issue
2
First Page
118
Last Page
132
Publisher
Elsevier Inc.
Keywords
Sanction and enforcement information; Regulation of disclosure; Market reaction
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, leaves 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 1999–2005, 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.
DOI
10.1016/j.jaccpubpol.2009.01.001
Print ISSN
02784254
E-ISSN
18732070
Publisher Statement
Copyright © 2009 Elsevier Inc. All rights reserved.
Full-text Version
Publisher’s Version
Language
English
Recommended Citation
Firth, M., Rui, O. M., & Wu, X. (2009). The timeliness and consequences of disseminating public information by regulators. Journal of Accounting and Public Policy, 28(2), 118-132. doi: 10.1016/j.jaccpubpol.2009.01.001