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Strategic Public Shaming: Evidence from Chinese Antitrust Investigations

Research output: Contribution to journalArticle

Original languageEnglish
Pages (from-to)174-195
Number of pages22
JournalCHINA QUARTERLY
Volume237
Early online date10 Jan 2019
DOIs
Accepted/In press15 Feb 2018
E-pub ahead of print10 Jan 2019
Published1 Mar 2019

King's Authors

Abstract

This article examines strategic public shaming, a novel form of regulatory tactics employed by the National Development and Reform Commission (NDRC) during its enforcement of the Anti-Monopoly Law. Based on analysis of media coverage and interview findings, the study finds that the way that the NDRC disclosed its investigation is highly strategic depending on the firm's co-operative attitude towards the investigation. Event studies further show that the NDRC's proactive disclosure resulted in significantly negative abnormal returns of the stock prices of the firm subject to the disclosure. For instance, Biostime, an infant-formula manufacturer investigated in 2013, experienced −22 per cent cumulative abnormal return in a three-day event window, resulting in a loss of market capitalization that is 27 times the antitrust fine that it ultimately received. The NDRC's strategic public shaming might therefore result in severe market sanctions that deter firms from defying the agency.

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