Regulatory Uncertainty And Information Disclosure Quality

As the main battlefield of the future economy,capital market is in the critical period of reform.CSRC is one of the most important regulatory authorities and the deepening reform has also increased the overall regulatory uncertainty.It reflects in the rapid iteration of regulatory policies.Meanwhile,the process of policy formulation,adjustment and implementation is also complex and unpredictable.These have brought great regulatory uncertainty to the participants of the capital market.Especially for the listed companies,regulatory uncertainties will directly affect their micro behavior,and it is also a busy period for their work adjustment.In recent years,the issue of regulatory uncertainty has also been gradually highlighted by relevant departments.Many meetings of CSRC have been mentioned to reduce policy uncertainty.It can be seen that the regulatory uncertainty has attracted the attention of all parties.At the same time,the capital market has frequently occurred illegal cases and the problem of information disclosure in our country is still relatively serious.More than 40 percent of the illegal cases punished by the CSRC involve this problem each year,which brought significant losses to the capital market.It also caused a great response,making China’s supervision and information disclosure become the focus.As the main regulator of information disclosure,the regulatory uncertainty of CSRC will inevitably affect the company’s information disclosure behavior.However,different from the reality,the academic community has little discussion on the economic consequences of the uncertainty generated by the regulatory authorities.In this background,this research has certain theoretical and practical significance.Based on this,this paper studies the impact of regulatory uncertainty on the information disclosure quality.Besides,we analyze its internal mechanism and explore whether the impact will be different in enterprises with different audit quality,media supervision intensity and internal control quality.Firstly,after referring to a lot of literature,this paper theoretically analyzes the possible relationship between regulatory uncertainty and corporate information disclosure according to the information asymmetry,principal-agent and stakeholder theory,and comes up with the competitive hypothesis of this paper.Secondly,this paper is empirically tested with the data of China’s A-share listed companies from 2010 to 2020.In addition,the robustness test was carried out by replacing independent and dependent variables,controlling individual fixed effects,controlling macro and regional factors,variable lag period,instrumental variable method,using only manufacturing samples,and "placebo" test.Finally,in the further analysis,we explore the mediating effect of financing constraints and management agency costs.Then we analyze the heterogeneity of this relationship in enterprises with different audit quality,media supervision intensity and internal control quality.The results of this paper show that:(1)the improvement of regulatory uncertainty will significantly reduce the quality of information disclosure.(2)The increase of corporate financing constraints and higher managerial agency costs are the internal mechanism.Regulatory uncertainty increases the uncertainty of the enterprise’s future development,which makes the financing constraints increase.Therefore,the motivation of enterprises to beautify statements and manipulate earning is increased in order to obtain financing.On the other hand,the regulatory environment in this period is weak.The opportunities for managers to conduct self-serving behaviors and conceal information through manipulation are also increased.These will reduce the quality of enterprise information disclosure.(3)The impact will be more obvious in companies with poor audit quality,weak media supervision or poor internal control quality.This is mainly due to the high financing constraints and poor internal governance of such enterprises.In the period of high regulatory uncertainty,the motivation and opportunities for managers to manipulate information will increase.The major contributions of this paper including:(1)Different from previous studies that only focused on the impact of CSRC’ s specific regulations on corporate behavior,this article studies the effect of regulatory uncertainty on enterprises’ behavior and analyzes the internal mechanism.It deepens the understanding of the regulatory uncertainty and the internal mechanism of regulatory uncertainty affecting corporate behavior.It helps perfect the analysis framework and enriches the economic consequences research of regulatory uncertainty.(2)Most previous studies used the number of policies or official turnover to measure the regulatory uncertainty,while this paper constructs the regulatory uncertainty index referring to the economic policy uncertainty index.Based on text analysis method,we search articles related to regulatory uncertainty from eight major party and securities newspapers by defining key words about regulatory uncertainty.Then its occurrence frequency is standardized to further construct the regulatory uncertainty index.The measurement method provides ideas on how to measure regulatory uncertainty effectively and also supplements related literature.