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Post by Sapphire Capital on Jul 12, 2008 0:24:03 GMT 4
In a study by two Columbia Law School professors, Benjamin Liebman and Curtis Milhaupt, the pair found that Chinese exchanges' public shaming was steadily replacing the China Securities and Regulatory Commission's (CSRC) means of enforcement.
On the face of it, the Shanghai and Shenzhen stock exchanges have limited authority to wield over companies – a public notice rebuking firms being the most powerful tool.
But the CSRC, which has traditionally issued most punishments, is overloaded with cases, and often slow in dishing out retribution. The exchanges have stepped in and Chinese citizens' abhorrence of public humiliation means companies are taking heed.
The study examined the share prices of the targeted firms when they disclosed their wrongful conduct and when the criticism was published.
The admissions typically preceded the rebukes, and in the weeks that followed the firms' share prices underperformed the Shanghai stock exchange by an average of up to 6%. After the criticism, there was a further lag of up to 3%.
for further info and details see the May 08 Columbia Law Review Essay on: Reputational Sanctions in China’s Securities Market by Benjamin L. Liebman and Curtis J. Milhaupt
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