Does Public Enforcement Work in Weak Investor Protection Countries? Evidence from China*
研究中国2007年公共执法运动的效果，发现其改善了上市公司治理，减少了盈余管理，提高了盈余反应系数和会计业绩，表明在投资者保护薄弱的国家，设计得当的公共执法能提升股东价值。
ABSTRACT We examine the efficacy of public enforcement in weak investor protection countries by examining the outcomes of a comprehensive public enforcement campaign in China. The campaign, launched in 2007, was designed to help enforce China's first mandatory Corporate Governance Code, issued in 2002. The 2007 campaign was characterized by several important features: (i) the campaign required firms to identify their problems before the securities regulators conducted on‐site inspections; (ii) the campaign provided a detailed checklist of the status of a firm's compliance with the Code; (iii) the campaign was transparent with regard to the disclosure and correction of identified problems; and (iv) the campaign threatened penalties for firms that failed to correct the identified governance problems in a timely manner. Our empirical analyses suggest that the 2007 campaign was effective in improving publicly listed firms' corporate governance. The corporate governance improvement was associated with a reduction in earnings management, higher earnings response coefficients, and higher operating accounting performance. In addition, we find preliminary evidence that the detailed checklist is partially responsible for the efficacy of the campaign. Our results suggest that public enforcement, if properly implemented, works in increasing shareholder value in weak investor protection countries.