A Study On China’s Government Supervision Of Information Disclosure System For IPOs

Promising changes have been seen in China’s capital market during the past few years, following Chinese government’s proposal of establishing a multilevel capital market. As the economic structure reform deepens, the government supervision system has been greatly improved; however, many problems about direct financing, an important component of a capital market, have been observed. While the government has been consistently emphasizing the importance of information disclosure for IPOs, lack of standardization is not uncommon in real practice; moreover, new challenges emerge one after another. Such lack of standardization suggests violations and great risks, which are undoubtedly detrimental to the entire economic system and investors; and accountable for potential massive loss. This paper attempts to provide a novel contribution to both the theoretical and empirical aspects of the issue by examining the effect of government supervision on information disclosure for IPOs.Citing the recent incident of the listed company Ask-pharm’s false information disclosure, we analyze China’s present situation of information disclosure for IPOs. We found inadequacy of the relevant institution, inefficiency of the supervision system, defects of the relevant part of the legal system and other problems. We argue that the presence of these problems is largely due to poor implementation of the government supervision and low cost of violation. Based on our hypotheses, we suggest possible solutions in order to protect investors’ welfare and maintain the well-ordering of the securities market, including strengthening China Securities Regulatory Commission(CSRC) and the Exchange and Securities Association of China, perfecting the relevant laws, regulations and supporting policies, and providing unambiguous corresponding penalties.