| The capital market is the bridge and bond connecting entities and capital,investors and financing parties.The listed companies are the backbone of the development of a market economy.At present,the legal system construction of China’s capital market still needs to be improved,and the corporate violations occur frequently.This is not only detrimental to the long-term development of the company,but also hit investor confidence,affecting the normal operation of the capital market.According to the statistics of the CSMAR database,the violation ratio of listed companies showed a trend of rising fluctuation from 2011 to 2016 and decreased year by year from 2016 to 2020.Therefore,it is necessary to explore the reasons for the decline in corporate violations in recent years.Research on how to effectively restrain corporate violations,protect the interests of investors,and promote the high-quality development of the capital market is also one of the key topics in the field of corporate finance.Corporate violations are an important manifestation of the imperfect internal governance system,and the suppression of corporate violations depends on the perfect supervision mechanism.As the most important external regulatory body in the capital market,the CSRC’s core responsibility lies in maintaining the stable and healthy operation of the capital market,to further promote the high-quality development of the capital market.To strengthen the supervision in the process and afterward,the CSRC decided to implement the random inspection system in 2016,that is,randomly select inspection objects,randomly select law enforcement inspectors,and at the same time publicize the random inspection and investigation results to the public promptly.As an innovative measure of securities supervision,this system is a significant innovation of combining government governance mechanism and market supervision system,and its implementation effect has become a concern of theoretical and practical circles.So,is the CSRC’s random inspection work the direct cause of the decline in the rate of corporate violations since 2016?Therefore,using the data of non-financial listed companies in Shanghai and Shenzhen A-shares from 2011 to 2020,this paper empirically tests the impact of random inspection by CSRC on corporate violations and further explores the mechanism,heterogeneity impact,and economic consequences.Specifically,there are four research findings as follows.First,the CSRC’s random inspection restrains corporate violations and reduces the severity of violations.Around this conclusion,further tests are made as follows.First of all,this paper examines the impact of the three effects of the CSRC’s random inspection on corporate violations,and the following research findings are found.For the long-term effect,the CSRC’s random inspection can inhibit corporate violations within two years.In terms of deterrence effect,this paper finds that the influence of random inspection of CSRC on restraining corporate violations is more significant in the repeated inspection group with"put back" compared with the non-repeated inspection group.As far as spillover effects are concerned,random inspection by the CSRC can reduce corporate violations in the same region and industry.Moreover,the paper explores the impact of the subdivision characteristics of inspection announcements on corporate violations after the end of the random inspection work of CSRC and the following conclusions are obtained.(1)After the end of the random inspection work,the disclosure of inspection announcements has a more significant inhibitory effect on corporate violations.(2)Different types of inspection announcements are different for the violation performance of the corporate.Compared with the supervision letter and the warning letter,the CSRC’s order correction measures and administrative punishment decision can restrain the corporate violation.(3)The more detailed the contents of the inspection announcement and the more problems of corporate misconduct are detected,the greater the impact of the CSRC’s random inspection on restraining corporate violations.(4)In the inspection announcement,it is pointed out that the company’s regulatory guidelines,inside information,and other issues have limited impact on the corporate violations,while the announcement can significantly restrain the corporate violations when it involves problems in information disclosure,corporate governance,and financial accounting.Then,by further investigating the subdivision characteristics of the CSRC’s random inspection on corporate violations,and the following conclusions are reached.On the one hand,compared with leaders’ violations,the random inspection can significantly inhibit information disclosure violations and business violations.On the other hand,considering the impact of potential violations,this paper finds that random inspection inhibits the company’s tendency to violate regulations and increases the probability of being inspected for violations.Second,corporate governance,information disclosure,and major shareholders’behavior have a partial mediating effect on the influence of CSRC random inspection on corporate violations,that is,CSRC random inspection inhibits corporate violations by improving the level of corporate governance,strengthening information disclosure and restricting major shareholders’ behavior.To be specific,first of all,random inspection law enforcement personnel focus on corporate governance issues in the on-site inspection process,point out internal governance deficiencies and help the corporate timely rectification,to improve the level of corporate governance.Good corporate governance can regulate the corporate’s production and operation behavior,reduce the motivation for violations,and restrain the occurrence of violations.Moreover,the CSRC’s random inspection can strengthen the company’s information disclosure,improve the information disclosure environment and the quality of information disclosure,reduce the degree of information asymmetry,reduce the company’s illegal behavior through complex and hidden ways,and finally restrain the tendency of Violation.Finally,the random inspection of CSRC.plays a deterrent effect,constrains the behavior of major shareholders seeking control for their private interests,reduces the motivation of major shareholders to hollow out,and reduces violations.Third,the influence of random inspection by CSRC on corporate violations is different due to the internal characteristics and external environment of the corporate.Specifically,based on the characteristics of internal perspective,compared with large-scale companies,companies with strong supervision ability of independent directors,and companies with low separation degree of two rights,the inhibitory effect of random inspection by CSRC on corporate violations is significantly manifested in small-scale companies,companies with insufficient supervision by independent directors,and companies with high separation degree of two rights.From the perspective of the external environment,this paper finds that compared with the regions with a low degree of marketization,a far distance of supervision and cross-listed companies,the inhibitory effect of CSRC random inspection on corporate violations is significant in the regions with a high degree of marketization,a close distance of supervision and non-cross-listed companies.Fourth,the economic consequences of the impact of the CSRC random inspection on corporate violations show that the random inspection to curb corporate violations ultimately reduces corporate risk and promote corporate development.On the one hand,based on the perspective of corporate risk,this paper finds that the random inspection by CSRCsignificantly reduces the risk of corporate operation and stock price crash by restraining corporate violations.On the other hand,based on the perspective of corporate development,this paper finds that the random inspection by CSRC can improve the efficiency of the corporate and ultimately enhance the total factor productivity and corporate value.The innovation of this paper is mainly reflected in the following five aspects.First,based on the study of the impact of the exogenous event of the CSRC random inspection system on corporate violations,the causal effect can be better identified.Since the selection of random inspection objects by local securities regulatory bureaus is randomly generated,this natural exogeneity effectively alleviates the endogeneity problem of research.Based on this exogenous impact,the randomly selected companies are taken as the treatment group,and the non-selected companies are taken as the control group.Combined with the multi-period difference-in-difference model,the implementation effect of the CSRC random inspection can be more accurately tested,and the causal effect of the CSRC random inspection on corporate violations can be better identified.Second,this paper provides incremental evidence for the direct effect of random inspection by CSRC.The existing literature pays less attention to the implementation effect of the CSRC’s random inspection,and mainly studies the indirect consequences of random inspection.The primary goal of the random inspection is to strengthen the supervision in the process and afterward,detect and restrain corporate violations.Therefore,examining the relationship between the CSRC random inspection and corporate violations will help to further understand the direct effect of implementing the random inspection and enrich the research results of the random inspection.Third,this paper improves the research on the influencing factors of corporate violations.A large body of literature has explored the impact of corporate violations from the perspective of corporate internal governance and external supervision.As the main body of external supervision,the CSRC has carried out preventive supervision and punitive intervention after corporate violations.The implementation of the random inspection by the CSRC is a new measure to innovate the supervision in the process and afterward.Based on this perspective,this paper explores the impact,on corporate violations and expands the theoretical literature on the influencing factors of corporate violations.Fourth,this paper clarifies the mechanism of the CSRC’s random inspection affecting corporate violations.Centering on corporate governance,information disclosure,and major shareholder behavior,the paper deeply explores the mechanism of the external supervision of the CSRC on corporate violations and opens the "black box" of securities supervision and enforcement affecting corporate violations.Moreover,it is helpful to clarify the logical chain that the CSRC’s random inspection on corporate violations.Fifth,this study has strong practical significance,especially for the improvement of the CSRC random inspection system design has certain enlightenment.The random inspection of listed companies by CSRC can optimize the external governance environment,improve the efficiency of supervision,reduce corporate violations,and promote the healthy development of the capital market.By investigating the three effects of the system(longterm effect,deterrent effect,and spillover effect)and the impact of the subdivision characteristics of the inspection announcement after the random inspection work on the corporate violations,the paper finds the implementation effect of random spot check is different.These findings will provide evidence for the CSRC to further improve the design of a random inspection system,and also have certain policy implications for regulatory agencies to strengthen supervision. |
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