{"title":"Building an open and stable capital market: a supervision intensity perspective","authors":"Fanjie Fu, A. Collins, Shujie Yao","doi":"10.1080/13547860.2022.2089477","DOIUrl":null,"url":null,"abstract":"Abstract This article investigates the impact of supervision intensity on stock price crash risk (SPCR) in China. A firm’s decision to hide bad news lies in the trade-off between the benefits of violation and the costs of being punished by government regulations. Our research findings reveal an inverted U-shaped relationship between SPCR and supervision intensity. Institutional shareholding strengthens the inverted U-shaped relationship between supervision intensity and SPCR through the mediating effect. This inverted U-shaped relationship is even more sensitive in low transparency firms. Better local market conditions and external auditing seemingly enhance supervision effectiveness, and hence mitigate SPCR. This article also discusses the supervision of other developed countries, such as the USA, Japan, and the UK, as well as other historical evidence to further inform the design of open and stable capital markets, particularly in the Chinese context.","PeriodicalId":46618,"journal":{"name":"Journal of the Asia Pacific Economy","volume":"27 1","pages":"551 - 584"},"PeriodicalIF":1.4000,"publicationDate":"2022-07-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"2","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of the Asia Pacific Economy","FirstCategoryId":"96","ListUrlMain":"https://doi.org/10.1080/13547860.2022.2089477","RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q3","JCRName":"ECONOMICS","Score":null,"Total":0}
引用次数: 2
Abstract
Abstract This article investigates the impact of supervision intensity on stock price crash risk (SPCR) in China. A firm’s decision to hide bad news lies in the trade-off between the benefits of violation and the costs of being punished by government regulations. Our research findings reveal an inverted U-shaped relationship between SPCR and supervision intensity. Institutional shareholding strengthens the inverted U-shaped relationship between supervision intensity and SPCR through the mediating effect. This inverted U-shaped relationship is even more sensitive in low transparency firms. Better local market conditions and external auditing seemingly enhance supervision effectiveness, and hence mitigate SPCR. This article also discusses the supervision of other developed countries, such as the USA, Japan, and the UK, as well as other historical evidence to further inform the design of open and stable capital markets, particularly in the Chinese context.
期刊介绍：
Journal of the Asia Pacific Economy (JAPE) is concerned primarily with the developing economies within Pacific Asia and South Asia. It aims to promote greater understanding of the complex factors that have influenced and continue to shape the transformation of the diverse economies in this region. Studies on developed countries will be considered only if they have implications for the developing countries in the region. The journal''s editorial policy is to maintain a sound balance between theoretical and empirical studies. JAPE publishes research papers in economics but also welcomes papers that deal with economic issues using a multi-disciplinary approach. Submissions may range from overviews spanning the region or parts of it, to papers with a detailed focus on particular issues facing individual countries. JAPE has a broad readership, which makes papers concerned with narrow and detailed technical matters inappropriate for inclusion. In addition, papers should not be simply one more application of a formal model or statistical technique used elsewhere. Authors should note that discussion of results must make sense intuitively, and relate to the institutional and historical context of the geographic area analyzed. We particularly ask authors to spell out the practical policy implications of their findings for governments and business. In addition to articles, JAPE publishes short notes, comments and book reviews. From time to time, it also publishes special issues on matters of great importance to economies in the Asia Pacific area.
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