An Empirical Analysis of the Public Enforcement of Securities Law in China: Finding the Missing Piece to the Puzzle

Abstract

Public enforcement regime in China has long been blamed for its under-deterrence of securities crimes. We collect data on public enforcement outcomes from the documents disclosed by listed firms, and find that the outputs of law enforcement have increased significantly since 2011, thanks to the efforts made by the China Securities Regulatory Commission's 38 regional offices. However, because of lacking reliable private enforcement regime and the limited monetary penalties, general enforcement of securities law is still regarded as weak. In addition, there exists a salient pattern of selective enforcement. Private-owned listed firms suffer from disproportionately high enforcement intensity, both in terms of the number and severity of sanctions, from the regulators, whereas state-owned, particularly central-government-controlled firms enjoy the most favorably treatment, though the gap being reduced in recent years.

Keywords: Public enforcement, Securities law, Empirical analysis, CSRC, Regional offices, Stock exchanges, China

JEL Classification: G18, G28, G32, G34, G38, K22