Information asymmetry, regulatory inquiry, and company mergers and acquisitions: evidence from Shenzhen Stock Exchange comment letters

This study investigates the governance effect of comment letters. Companies with severer information asymmetry are more likely to receive merger and acquisition (M&A) comment letters, which demonstrate a lower M&A success rate; however, such companies exhibit better long-term M&A performance. Further analysis shows that the long-term governance effects are stronger in cross-industry and cross-region samples and that the transmission channels are information disclosure and internal control quality of the inquired firms. This study enriches the literature on government regulation effectiveness, develops new evidence on the localisation of government regulation from developed economies, and provides policy implications for further regulation reform in transition economies.