Impact of information disclosure violation on firm value in Chinese listed firms

Abstract

We analyze the association between information disclosure violation (IDV) and firm value, based on a sample of Chinese listed firms that were subject to China Securities Regulatory Commission (CSRC) enforcement actions from 2000 to 2014. Using Tobin’s Q as a proxy for firm value at the end of the enforcement action year, we find that firm value in violating firms is significantly lower than firm value in non-violating firms. Further, we find IDV with the following characteristics can cause serious damage to firm value: IDV related to inflated profit or asset fabrication have a more damaging effect on firm value; the total number of violation types, fines and the total number of admonishment types are negatively associated with firm value; violation frequency and number of years between violations and CSRC enforcement action are negatively related to firm value.