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Law environment, government regulation and implicit contract: Empirical evidence from the scandals of China¡¯s listed companies

Author

Listed:
  • CHEN Donghua

    (Accounting Department, School of Business, Nanjing University, Nanjing 210093, China)

  • ZHANG Tiesheng

    (Accounting Department, School of Business, Nanjing University, Nanjing 210093, China)

  • LI Xiang

    (Accounting Department, School of Business, Nanjing University, Nanjing 210093, China)

Abstract

In China¡¯s transitional economy, government regulation could be a substitute for the lack of law mechanism and regulator¡¯s power could spill over into other areas not regulated. Then, theoretically it could construct implicit contracts. For example, China Securities Regulatory Commission (CSRC) has the rights to choose initial public offering(IPO) firms among applicants. It might construct implicit contracts between CSRC and local governments if the former consider the frequency and the severity of the scandals among different areas. Local governments could make decisions on whether and how much to implement the implicit contracts.

Suggested Citation

  • CHEN Donghua & ZHANG Tiesheng & LI Xiang, 2008. "Law environment, government regulation and implicit contract: Empirical evidence from the scandals of China¡¯s listed companies," Frontiers of Economics in China-Selected Publications from Chinese Universities, Higher Education Press, vol. 3(4), pages 560-584, December.
    • Handle: RePEc:fec:journl:v:3:y:2008:i:4:p:560-584
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    File URL: http://journal.hep.com.cn/fec/EN/10.1007/s11459-008-0028-2
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    More about this item

    Keywords

    law environment; government regulation; implicit contract; corporate scandal;
    All these keywords.

    JEL classification:

    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
    • K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law

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