Randomized inspection and investment-price sensitivity: A natural experiment in China

Lina Xie and Chenxi Wang

Finance Research Letters, 2025, vol. 74, issue C

Abstract: This study examines the impact of randomized inspection on the investment-price sensitivity. We find that the random inspection of China Securities Regulatory Commission (CSRC) increases the inspected companies’ investment-price sensitivity. The CSRC’s random inspection enhances the investment-price sensitivity by increasing the stock price informativeness and strengthening corporate governance. The effect of CSRC’s random inspections on investment-price sensitivity is more pronounced among firms with poorer information quality and higher agency costs. The study reveals the role of securities regulation in improving the investment-price sensitivity and thus provides implications for policymakers.

Keywords: Random inspection; Investment-price sensitivity; Regulation (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:74:y:2025:i:c:s1544612324017537

DOI: 10.1016/j.frl.2024.106724

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