Comply-or-explain regulation and investor protection
研究上海证券交易所2012年实施的遵守或解释分红规定，发现该规定通过减少控股股东掏空行为来保护中小投资者，无论公司是支付现金分红还是解释原因都有效。
We investigate a 2012 comply-or-explain regulation implemented by China’s Shanghai Stock Exchange. The regulation requires eligible firms to pay 30% of their current-year profits as cash dividends or explain the reasons why they do not meet this requirement through a public conference call. Using firms listed on the Shenzhen Stock Exchange as a control group, our difference-in-differences estimates suggest that firms subject to the regulation decreased tunneling, irrespective of whether they complied by paying or disclosing. Further analyses suggest that the reduction in tunneling is partially attributed to enhanced regulatory monitoring over explaining firms and the constraint on excess cash of paying firms. These findings offer novel policy insights into how a flexible comply-or-explain form of regulation can mitigate agency costs between controlling and minority shareholders in a weak institutional environment.