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Are Securities Regulators Biased? Empirical Evidence of Securities Enforcement Actions in China 1998–2016

Professor Chao Xi
Faculty of Law, The Chinese University of Hong Kong

20 July 2017, 6 p.m.
Room 2.05, Institute of East Asian Studies University of Cologne


Little is known about the biases, if any, of the primary Chinese securities regulators, viz., the China Securities Regulatory Commission, the Shanghai Stock Exchange, and the Shenzhen Stock Exchange. This research draws on a unique, hand-collected dataset on all disclosed securities enforcement actions, both formal and informal, taken against securities violations by the Chinese securities regulators during the period from 1998 through 2016. It offers a glimpse into the intensity of securities enforcement actions, both market-level and firm-level, in China. It also sheds important light on the determinants of Chinese securities enforcement practices. It shows empirically that firms that are larger in size, firms that are controlled by the state, and firms that characterize with a higher level of political embeddedness, and firms that cooperate more closely with the securities regulators are less likely to be targeted and, when they are targeted, they are more likely to fare better. A somewhat counter-intuitive finding of this research is that a closer personal bond with the securities regulators are likely to reduce the severity of enforcement actions, but are unlikely to minimize the likelihood of being targeted in the first place.

Chao Xi is Professor of Law and Vice Chancellor’s Outstanding Fellow of the Faculty of Law, The Chinese University of Hong Kong (CUHK). He specializes in comparative corporate law, securities regulation, and financial regulation, and has published extensively in leading peer-reviewed international journals. He is Professorial Research Associate of the SOAS China Institute, University of London, and a Board Member of the European China Law Studies Association.