Preventive Regulation and Corporate Investment in Innovation: A Quasi-natural Experiment Based on Random Inspections by the China Securities Regulatory Commission

Random inspections by the China Securities Regulatory Commission strengthen ex-ante supervision, but research on their economic consequences remains insufficient. Using such inspections as a quasi-natural experiment, we select A-share listed high-tech companies from 2014 to 2020 to empirically examine the impact of this preventive regulation on firms’ innovation investments. The regulation has a significant enhancing effect on innovation investment, particularly among firms with high financing constraints and financing costs, prompting them to increase their innovation investments by alleviating financing constraints. Additionally, random inspections have a more pronounced effect on private companies, those with low market value, less investor attention and media attention, indicating that they alleviate firms’ financing constraints and promote innovation through the screening effect and the spotlight effect, respectively.