Can Stock Exchange inquiry letters reduce stock price crash risk?

ABSTRACT

The inquiry letters of annual reports play an increasingly important role in performing the first-line supervision duties of Stock Exchange. Based on 2015–2017 annual report inquiry letters, this paper studies the impact of regulatory inquiry on stock price crash risk empirically. The results show that the Stock Exchange’s inquiry on the annual report of listed companies reduces the stock price crash risk significantly, and the more questions are inquired by the Stock Exchange, the stronger inhibitory impact will be played on the companies’ stock price crash risk . In addition, compared with companies replied to the inquiry letters in time, the inquiry has a stronger inhibitory effect on stock price crash risk of companies with delayed reply or no reply.

KEYWORDS:

• Annual Report Inquiry Letter
• Stock Price Crash Risk
• Regulation by Exchanges
• China

JEL CLASSIFICATION:

• G30
• M41

Disclosure statement

No potential conflict of interest was reported by the authors.

Additional information

Funding

This work is supported by the Humanities and Social Sciences Foundation of Chinese Ministry of Education (No.18YJC630145) and the Fundamental Research Funds for the Central Universities (No.2722019PY016).