The Industrial Effect And Economic Consequences Of The Media Questioning Financial Fraud

At present,questioning from the public media has become one of the important clues for the China Securities Regulatory Commission(CSRC)'s inspection and law enforcement On August 19,20 1 3,the Opinions on further strengthening the work of Inspection and Law Enforcement issued by the CSRC states that "We will strengthen the monitoring and analysis of news media's reports and comments on Securities and futures violations,and conduct timely investigations on important media clues with broad social impact and clear clues."Two characteristics of media supervision,namely low cost and early intervention,make it possible for media queries to discover problems and risks in capital market and protect investors' rights and interests.However,has the role of the media been exaggerated?Media queries may lead to fluctuations in the share prices of companies in the same industry.Meanwhile it has been proved by some scholars that the fluctuation of stock price affects the managers'decision-making.Based on the above logic,if the media queries lead to sharp fluctuations in the share prices of the same industry companies,is it possible for the management of other companies in the same industry to make earnings management in order to cope with the crisis caused by the"interlink"?Does the role of the media exceeds the proper limit?This paper chooses A-share listed companies which have been questioned by the media in 2013-2017.Firstly,this paper examines the changes of stock prices of Companies in the same industry after media queries are exposed.Then,on this basis,it examines the economic consequences of spillover effect,that is,whether the changes of stock prices lead to earnings management by the management of companies in the same industry.Furthermore,the paper divides spillover effect into two aspects:the decline of stock prices caused by contagion effect and the rise of stock prices caused by competition effect to analyze the economic consequences.The results show that media questioning the financial fraud of listed companies has caused spillover effect in the industry,and the main effect is contagion effect.Moreover,media queries cannot inhibit earnings management behavior of companies in the same industry as a whole.Through further research,it can be observed that the economic consequences of competition effect and contagion effect are different:companies with competition effect reduce earnings management behavior in reason of the information reflected in stock prices and managers'intention to accommodate the investors'psychological needs.In the meantime,companies with contagion effect tend to implement negative earnings management to avoid the attention from the regulators and the media,since they can sense the regulatory pressure caused by media queries.Besides,managers tend to cater to investors'low performance requirements of the company.