Exchange Inquiry Letters and Stock Price Informativeness: Evidence from China

ABSTRACT

Using the data of China A-share listed firms from 2015 to 2019, we examine the effect of exchange inquiry letter regulation on stock price informativeness. It is found that the stock prices of inquired firms contain more firm-level information after the receipt of inquiry letter. Further research demonstrates that attracting investors’ attention to more firm-specific information is the potential channel through which inquiry letters improve stock price informativeness. This paper provides empirical evidence for the effectiveness of exchange inquiry letter regulation, which has significant implications for listed firms improving information disclosure and for regulators playing a better role in emerging markets.

KEYWORDS:

• Inquiry letters
• stock price informativeness
• regulation
• investors’ attention

JEL Classification:

• G14
• M48

Disclosure Statement

No conflict of interest exists in the submission of this manuscript, and the manuscript is approved by both authors for publication. I would like to declare on behalf of my co-author that the work described was original research that has not been published previously, and not under consideration for publication elsewhere, in whole or in part. Both authors listed have approved the manuscript that is enclosed.

Data Availability Statement

The datasets used to support the results or analyses are available from the corresponding author on reasonable request.

Supplementary Material

Supplemental data for this article can be accessed online at https://doi.org/10.1080/1540496X.2022.2072200

Notes

1. An untabulated event study indicates that inquiry letter regulation has attracted investors’ attention immediately upon the receipt of inquiry letter, providing additional support for the argument that the inquiry letter does induce an increase in investor attention and this in turn leads to an increase in price informativeness.

Additional information

Funding

This work was supported by National Natural Science Foundation of China [72173057, 7211101263, 71672077]; Natural Science Foundation of Guangdong Province, China [2021A1515011536]; Fundamental Research Funds for the Central Universities [19JNKY08].