The Effect Of Exchange’s Supervision By Inquiry Letter On Enterprises’ Inefficient Investment

The phenomenon of inefficient investment is prevalent in our country’s listed companies,which is manifested as over-investment and under-investment.Inefficiency investment erodes the value of the enterprise and damages the interests of the majority of stakeholders,including major shareholders,creditors,and small and medium investors.Existing research generally believes that the principal-agent problem and information asymmetry are the main reasons for the inefficient investment of enterprises.Compared with the CSRC,the two major exchanges in Shanghai and Shenzhen play a unique role of "front-line supervision".The supervision by issueing an exchange’s inquiry lette is an important means for the exchange to supervise listed companies.The exchange is reviewing the information disclosure announcements of listed companies.During the process,if there is doubt about the content of the announcement of the listed company,an inquiry letter will be issued in a timely manner,and the listed company will be required to reply within the specified time and publicly disclose the content of the reply.The annual report,semi-annual report,quarterly report and other periodic reports can comprehensively reflect all the operating activities and operating performance results of the listed company during the reporting period,which can match the research on the inefficient investment of the listed company in each year.Like most scholars who study the supervision of exchange inquiries,this paper selects exchange’s inquiry letters to regular reports as the research object.Through searching keywords in the contents of 2,793 regular report inquiry letters crawled from Shanghai and Shenzhen Stock Exchanges from 2015 to 2020,it was found that"investment" or "project" accounted for 90.15%of the functions,which is also corroborated from the data level.The investment behavior of listed companies is the focus of front-line supervision of exchanges.Will exchange’s inquiry letter play a direct regulatory role in the inefficient investment of listed companies,or will it improve the transparency of accounting information,reduce information asymmetry,and send risk signals to stimulate investors and creditors?The attention and supervision of stakeholders,crack down on the misappropriation of the company’s interests by major shareholders,deter the management of listed companies,and crack down on their opportunistic behavior,thus indirectly supervising the inefficient investment of listed companies?Taking the above problems into consideration,this paper puts forward the research hypothesis that the regulation of the exchange’s regular report inquiry letter can restrain the degree of inefficient investment of enterprises through literature review and theoretical analysis.Then,it explores the impact of exchange inquiry letter supervision on corporate inefficiency investment and its role path through empirical testing.The empirical results show that:(1)The regular reporting inquiry letter can significantly inhibit the degree of inefficient investment of enterprises.(2)Multiple inquiries have a stronger inhibitory effect on the degree of inefficient investment of enterprises.(3)The content of the inquiry letter involving "investment" has a stronger inhibitory effect on the degree of inefficient investment of the enterprise.(4)There is heterogeneity in the nature of property rights in the relationship between exchange’s inquiry letter and the degree of inefficient investment of enterprises.The inquiry letters has a significant inhibitory effect on the level of inefficient investment in non-state-owned enterprises,while the supervision effect of inquiry letters in state-owned enterprises is not obvious.(5)The degree of earnings management plays an intermediary role in the suppression of inefficient investment by the exchange’s regular report inquiry letter.The exchange inquiry letter supervision effectively inhibits the degree of earnings management of enterprises and improves the accounting information of listed companies.transparency,thereby inhibiting the degree of inefficient investment of enterprises.Then this paper verifies the robustness of the experimental conclusions through the PSM model,the heterogeneous timing DID model,and the replacement of control variables.Finally,this paper puts forward specific suggestions for the exchange inquiry letter system,listed companies and their management,and small and medium investors.