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Registration reform: A game-changer for corporate financial discipline?

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  • Jiang, Weiwei
  • Liu, Bingru

Abstract

This study examines the impact of China's registration system reform on corporate financial discipline, offering valuable insights into how market-oriented regulatory changes can enhance transparency and accountability in capital markets. The registration system diverges from the conventional approval framework, characterized by rigorous regulatory scrutiny and administrative pricing, by emphasizing information transparency and market-based distribution to align company conduct with international standards of financial integrity. Utilizing a Difference-in-Differences (DID) methodology, we analyze data from 2015 to 2022, substantiating the governance impacts of reform registration on financial reports. Mechanistic analysis identifies two principal channels: the reform reduces information asymmetry by requiring extensive disclosure, thereby enabling investors and regulators to oversee financial practices more effectively; simultaneously, it compels firms to enhance internal governance (e.g., board independence, audit oversight) to satisfy increased compliance requirements, establishing a self-reinforcing cycle of discipline. This research integrates institutional economics with micro-level firm behavior, validating the effectiveness of the reform in promoting financial integrity while providing actionable insights for policymakers to enhance market-oriented reforms and for enterprises to improve their governance systems proactively. Ultimately, it fosters a global discourse on how regulatory frameworks can influence business behavior, highlighting the importance of openness and market accountability in establishing robust and reliable capital markets.

Suggested Citation

  • Jiang, Weiwei & Liu, Bingru, 2025. "Registration reform: A game-changer for corporate financial discipline?," Finance Research Letters, Elsevier, vol. 85(PE).
    • Handle: RePEc:eee:finlet:v:85:y:2025:i:pe:s1544612325015089
    DOI: 10.1016/j.frl.2025.108254
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    References listed on IDEAS

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