| With the occurrence of fraud such as the Enron Event,protecting the interests of investors is vital.For any regulatory system,protecting the interests of investors is still challenging.Although China has promulgated many laws and regulations such as Securities Law and Company Law,the market behaviors such as financial statements and tunneling are very popular on markets and severely harming the interests of investors.Besides,China's capital market emerged later than those of developed countries.CSRC is the unified supervisor of the securities market,and takes it as its duty to maintain the healthy and orderly development of the market.In general,it is particularly important to explore how to protect the interests of investors at present.Protecting the interests of investors,the ?Law and Finance? school emphasizes the protection of investors from the perspective of the law,that is,through the development of perfect laws and regulations and the improvement of the level of law enforcement.However,due to differences in history,culture and so on,it's difficult for developing countries to replicate the legal systems of developed countries.And the level of law enforcement is relatively low making the behavior that causes the securities market to harm the investors' interests occurs from time to time.Therefore,more and more scholars study how to improve investor protection from the perspective of the extra-legal system.So,the existing literature explores how to protect investors along two lines.One is the protection of investors from the perspective of law and securities market supervision;the other is how to improve investor protection from the perspective of internal and external governance of companies.Specifically,first of all,the optimal contract theory holds that under the mode of separation of management and ownership,the principal can restrict and motivate the agent's behavior by designing appropriate contract clauses.As a result,the management aims to maximize shareholders' interests.Secondly,the internal control can protect investors mainly through two ways: first,the design of internal control can restrain the opportunistic behavior of management and controlling shareholders,reduce the agency cost,improve the enterprise value,and then realize the protection of investors.Second,internal control improves the actual reliability of accounting information,effectively alleviates information asymmetry and indirectly protects investors.Thirdly,as an informal institution,the media plays the role of "fourth right," which not only attracts the attention of social groups and forms the advantages of social norms,but also has the benefits of early intervention and low supervision cost.Although there have been a large number of studies on the issue of law enforcement in China,the majority of them are concerned with the market reaction near the date of punishment announcement and the economic consequences of the investigation.There is a long period between the start of the investigation and the end of the punishment.Moreover,the filing of the inquiry is more forward-looking and can better protect investors.However,there are few systematic types of research to study each link between the investigation and the end of punishment.So,this paper takes the non-financial listed companies that were investigated by the CSRC from 2002-2016 as the research sample and examines the influence of negative media reports on the investigation,the impact of negative media reports on the closure of the investigation and the effect of negative media reports on the timeliness of the investigation.The main conclusions of this paper are as follows:First of all,we study the influence of negative media reports on the investigation.Specifically,we use the absolute amplitude of negative media reports(natural logarithm of negative media reports)and abnormal amplitude(residual estimated by the media prediction model)to measure the negative media reports before investigation.According to the trend chart of negative media reports before the investigation,we find that the negative media reports before investigation increased significantly,and it is especially apparent for the policy-oriented media.From the results of multiple regression analysis,we investigated the negative media coverage of the window period [-70,-10)before the investigation,and find that negative media coverage induces regulators to step in.After considering the nature of media,we find that the policy-oriented media plays an active role.According to the content of the news,it can be divided into two categories: questioning the company's fraud-related news and non-fraud-related news.We find that when more news is reported about the company's fraud,the company is more likely to be filed for investigation.Especially,when policy-oriented media reports more corporate fraud news can induce companies to be investigated.In the robustness test,we use the placebo test method,adjust the critical window period of negative media reports and expand media news sources,they all show our conclusion remains the same.Secondly,we examine the impact of negative media reports on the closure of the investigation.Since there are no relevant documents or clear information that a company has not been punished for years after an investigation is not closed,there is no guarantee as these "old cases" will be closed in the coming years.Well,as a sub-optimal option,in this paper,"not closed" cases are defined as cases that have not been punished until the end of 2017,and the time distance between the date of filing investigation and the end of 2017 is more than 90 quartiles(i.e.,1105 days)of the average investigation time.Accordingly,the assumed closing date for the unclosed company is 1105 days after the filing of the investigation.Similarly,this chapter uses the absolute and abnormal amplitude of negative media reports to measure the average number of times of negative media reports from the time of filing investigation to the issuance of a written decision on administrative punishment.The results show that companies with less negative media coverage are less likely to be closed after filing investigations and the policy-oriented media play a leading role.Besides,the less the fraud-related news reports are reported,the more likely the company will not be closed,and when the policy-oriented media report less fraud-related news,the company is less likely to be closed.In the robustness test,we changing the definition of "not closed" to 95 quartiles(equal 1273 days)and 99 quartiles(equal 1841 days),elimination of "mechanical" cases and so on,our conclusions remain unchanged.Finally,we examine the impact of negative media reports on the timeliness of punishment.This chapter defines "the timeliness of punishment" as the time interval between the date of filing investigation by the CSRC and the issuance of a written decision on administrative penalty(I.e.,the date on which the punishment document is signed off).According to the quantiles,the timeliness of punishment was divided into four groups,namely [25,319]?(319,495]?(495,757] and(757,2813].From the trend,as the number of negative media reports decreased,the longer the investigation time is,the less timely the punishment is.The results of multiple regression analysis also showed that the more negative media reports are,the more timely the punishment were.Particularly,when the policy-oriented media reported more negative news,the more time the company is punished.In addition,we find that the more news reports are related to fraud,the more time the punishment will be.The results of the robustness test also show that our conclusions remain unchanged.The academic contributions of this paper are as follow.Firstly,we study the factors affecting the investigation and the consequences.Specifically,this paper examines the influence of negative media reports on the investigation,the impact of negative media reports on the closure of the investigation and the effect of negative media reports on the timeliness of the investigation.Therefore,the investigation of the whole process of investigation deepens our understanding of the law enforcement efficiency of the regulators and complements the literature on government supervision in the securities market.Secondly,the existing research on administrative law mainly examines the economic consequences of administrative punishment.Apparently,the punishment is only the end of administrative law enforcement,and we should not ignore the whole investigation,especially the beginning of an investigation.However,there are few systematic papers to investigate the entire process of an investigation.In this paper,we use the case of the investigation as the sample,systematically study the entire process of an investigation.Thirdly,this paper examines the impact of the media on the law enforcement efficiency of regulators,compared with existing literature,we provide a direct causality test for the influence of media supervision on administrative intervention.It further complements the empirical evidence that the media actively supervise the role of governance.Fourthly,this paper finds that media supervision increases the possibility of law enforcement agencies to intervene,it also promotes the process of administrative law enforcement,which helps to protect the interests of investors.Thus,the current study complements the literature on the protection of investors by media governance.The results of this paper also have the following practical significance.Firstly,in recent years,the number of listed companies investigated by the CSRC is increasing,the duration of the case is longer,and the amount of fraud is large,resulting in substantial losses for investors.In the case of market failure,the media not only provide clues for regulators to enforce the law but also make law enforcement agencies feel the pressure from all walks of life and urge them to perform their duties effectively.Therefore,in the current situation of the immature securities market and imperfect laws and regulations,we should pay more attention to the supervision role of the media in the securities market.Besides,under the background of China's system,it is of great significance to explore the influencing factors of the effectiveness of securities market supervision policy to protect the interests of investors and to maintain the healthy and stable development of China's capital market. |
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