Does regulatory distance matter in inquiry letters? Evidence from China

This paper examines the impact of regulatory distance on inquiry letters using data from Chinese A-share listed companies. The findings indicate that greater distance from regulatory agencies significantly raises the likelihood of firms receiving inquiry letters, owing to heightened criminal propensity among executives. This effect is more pronounced in companies with lower reputations, weaker political connections, and executives lacking overseas experience, as these factors fail to effectively curb criminal propensity. Further analysis confirms that the opening of high-speed rail mitigates the negative impact of distant regulation through the criminal propensity channel.