Impact of new securities law in China: evidence of ownership difference in government regulation

Abstract Does the government regulation equally treat all listed enterprises in China? The implementation of the new Securities Law in March 2020 provides an opportunity to examine potential ownership Difference in government regulation in China. This article makes two principal contributions. On the one hand, this article proposes a novel econometric methodology: FD-PSM-DiD (First-Difference’s Propensity Score Matching and Difference-in-Differences). In contrast to the conventional Propensity Score Matching and Difference-in-Differences (PSM-DID), FD-PSM-DID applies the first-difference transformation to the panel data. During propensity score matching, FD-PSM-DID accounts for incremental differences in time-varying characteristics, while also ensuring the similarity between the treatment group and the control group in each period. Consequently, FD-PSM-DID can better satisfy the parallel trends assumption. On the other hand, this article employs FD-PSM-DID to evaluate the impact of the new Securities Law on the information disclosure of listed enterprises in China. The findings reveal that the increment in information disclosure frequency of non-state-owned enterprises (non-SOEs) is significantly higher than that of state-owned enterprises (SOEs) due to the implementation of the new Securities Law. This confirms the existence of ownership heterogeneity in the impact of the new Securities Law on listed enterprises, providing statistically significant evidence for ownership Difference in government regulation in China.