, Volume 95, Issue 2 Supplement, pp 337-359
Date: 16 Apr 2011

Reactivity and Passivity After Enforcement Actions: Better Late Than Never

Rent the article at a discount

Rent now

* Final gross prices may vary according to local VAT.

Get Access

Abstract

We examine the dynamics between enforcement actions and the responses from both the board of directors and supervisory boards amid China’s governance reform. Rather than examining determinants of fraudulent activities, we investigate, after enforcement actions are imposed, whether the board of directors and supervisory boards react differently, and whether their different reactions play a role in preventing future occurrences of frauds. We find that both boards react to enforcement actions, but only the responses from the board of directors help us curb future enforcements under certain circumstances. The supervisory board fails to play any role in preventing future enforcements, even though it is one of the two monitoring mechanisms in the listed companies. Policy implications are discussed.