As a unique supervision system in China’s capital market, supervision inquiry is one of the measures taken by the exchange to conduct non-punitive supervision of listed companies. Therefore, exploring the factors that affect the issuance of inquiry letters by exchanges has become an important proposition for academic research. Based on China’s unique institutional arrangement, this paper discusses the factors that affect listed SOEs’ inquiries from supervision from the perspective of the Party organization governance, which is a heterogeneous supervision method. Specifically, this paper takes the internal governance inquiry letters issued by Shanghai and Shenzhen Stock Exchanges from 2015 to 2019 as the research object, and discusses the influence mechanism of the Party organization governance on the receipt of internal governance inquiry letters by listed SOEs. Through the research methods of empirical analysis and text analysis, this paper mainly draws the following conclusions: First, the Party organization governance can effectively reduce the probability and frequency of listed SOEs receiving internal governance inquiry letters. This conclusion still exits under the premise of controlling for endogeneity. Second, the results of the mediation effect show that the Party organization governance is mainly achieved by reducing agency costs and increasing information transparency, thereby reducing the probability and frequency of listed SOEs receiving internal governance inquiry letters. Third, this paper uses Python to identify the heterogeneity and difference of internal governance inquiry letters, and finds that the Party organization governance can effectively reduce the types of inquiry letters such as shareholder meeting governance issues, board governance issues, and managerial governance issues. Fourth, the results based on the moderating effect show that the effectiveness of the Party organization governance in reducing internal governance inquiry letters is more significant in the samples of discussion of pre-implementation and high promotion expectation of executives. Fifth, the receipt of internal governance inquiry letters will lead to a decrease in the cumulative abnormal returns (CAR).

The main contributions of this paper are as follows: First, it confirms that the Party organization governance can regulate the management behavior of SOEs, and provides useful evidence for the correct understanding of the Party organization embedded in the corporate governance structure. Second, it confirms that the Party organization governance is a supplement to the incomplete mechanism of market law, which can not only improve the transparency of company information, but also monitor hidden agency costs. Third, it not only verifies the effectiveness of pre-discussion system, but also verifies that attention should be paid to the use of executive promotion incentives.