Does Non-punitive Supervision Alleviate Stock Price Mispricing?
The implementation of non-punitive regulation represented by exchanges'annual report inquiry letters is an important initiative in China's innovative regulatory approach.Using data from A-share listed companies from 2015 to 2021,this study empirically examines the impact of non-punitive regulation on stock price mispricing based on annual report inquiry letters.The research finds that regulatory scrutiny through annual report inquiry letters can alleviate stock price mispricing,particularly reducing overvaluation.Enhancing the quality of corporate disclosure,reducing analyst's earnings forecast errors,and strengthening investor awareness are identified as important mechanisms through which annual report inquiry letters mitigate stock price mispricing.However,the presence of institutional investors and the state ownership nature of enterprises weaken these relationships,while media attention and regional rule of law levels have reinforcing effects.Furthermore,exploratory analysis reveals that the impact of annual report inquiry letter regulation on stock price mispricing exhibits a progressive trend over time and further reduces the risk of stock price collapses.
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