Does Non-punitive Regulation Affect Trade Credit Financing?

During the regulatory transformation of China's securities regulator focusing on information disclosure regulation,the Shanghai and Shenzhen stock exchanges carried out a major reform on the way of information disclosure of listed companies,called "the direct channel for information disclosure",and put the supervision emphases on the post-event review of information disclosure.Thus the review of periodic reports issued by listed companies and the selective issuance of periodic reports has become an important non-punitive means of stock exchanges'supervision.The Exchange sends an inquiry letter to the listed company,asking it to explain,supplement or correct the flaws of the disclosure.On the one hand,it can improve the authenticity,completeness and accuracy of the information disclosed by the listed company.On the other hand,listed companies' information disclosure publicly questioned by the stock exchanges will transmit a warning signal to the capital market.As a stakeholder who provides unsecured and unsecured credit lines,suppliers will inevitably pay high attention to the client companies with hidden risks,re-launch credit and risk assessments,and adjust trade credit decisions based on the assessment results.In addition,the inquiry letter of periodic report involves many common problems in the industry.Due to the lack of specific information disclosure in China's capital market,the information users of regulatory inquiries may be extended by the company's own suppliers to the suppliers of other companies in the same industry,causing a significant impact on their decisions of offering trade credit.This paper selects China's main board listed company from 2014 to 2017 as a research sample and adopts the double differential(DID)model to exploratory research whether the company that receiving the annual report inquiry letter and its other companies in the same industry will receive significant impact on the trade credit financing.The empirical results show that the trade credit financing of companies that receiving the annual report inquiry letter will be significantly reduced.This decline is not only reflected in the time dimension,but also in comparison with other not inquired companies.Further research found that only when the inquiry letter contains more questions and the response takes longer time,and only when the inquiry letter contains the types of questions that the supplier is most concerned about and the key words that refer to "suppliers",etc.,the net negative impact of the annual report inquiry letter on the company's commercial credit financing will be revealed.In addition,after the company receives the annual report inquiry letter,the trade credit financing of other companies in the same industry will be significantly reduced,but this phenomenon exists only in industries with a high proportion of letters.This result proves the same industry information transfer effect of exchange supervisory inquiries.Finally,the conclusions of this paper mean that the non-punitive supervision method issued by the exchange is informative,and it transmits a risk warning signal to the external stakeholders with the information disadvantage.Also,the conclusions indicate that the inquiry letter mechanism would do help to the stock exchanges'institutional innovation of regulatory transformation,which has important policy implications for the construction of China's multi-level securities supervision system.