Abstract:
Extant research on inquiry-based regulation has predominantly examined annual report inquiry letters and merger and acquisition inquiry letters as samples, exploring their impacts on the stock market and corporate behavior. However, there are few research on the role of inquiry-based regulatory systems in China's bond market. Based on inquiry letters and response letters during the review process of corporate bond issuance and listing, this paper examines bond market reactions to securities exchange inquiry-based regulation. The findings are summarized as follows. (1) The bond market shows negative reactions to announcements of bond issuance inquiry letters, with both average bond-weighted abnormal credit spreads and cumulative average bond-weighted abnormal credit spreads being significantly positive during event windows. (2) The negative market reaction intensifies when inquiry letters contain more questions, demonstrate higher readability, and require issuers to supplement the "major risk reminder". (3) When companies have lower internal control quality and lower analyst coverage, the bond market's negative reaction to bond issuance inquiry letters is more pronounced. (4) The characteristics of bond issuance inquiry letters influence issuers' decisions on whether to respond. Higher exchange review inquiry intensity and requirements to supplement "major risk reminder" are associated with a lower likelihood of issuer response. (5) The bond market responds positively to announcements of issuer response letters. More detailed response letters and lower degrees of evasiveness are associated with greater positive reactions in the bond market. This study provides insights for protecting the legitimate rights and interests of bond investors and improving the operational efficiency of the bond market.
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