Title

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

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

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Full-text Version

Publisher’s Version

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