In recent years, the securities market supervision system of China has gradually diversified, and the non-penalty regulations represented by inquiry letters have attracted more attention. With the increasing frequency of non-penalty regulations, inquiry letters gradually come into the public view, and the relevant media reports are also increasing. The current academic research on China’s securities supervision mainly focuses on penalty regulations, and less on non-penalty regulations. Although some studies have explored the economic consequences of inquiry letters, and found that non-penalty regulations improve the quality of auditing and the accuracy of performance forecast, and reduce the risk of stock price crash, whether the inquiry letters can truly play a regulatory role remains to be further explored.

Under this condition, using the panel data of A-share listed companies from 2013 to 2017, this paper tests the effectiveness of inquiry letters from the perspective of corporate risk-taking. The results show that after receiving financial report inquiry letters, the level of corporate risk-taking is significantly increased; the more the total number (times) of financial report inquiry letters, the more inquiries contained in inquiry letters, and the more the total number of reply announcements, the stronger the promotion effect on corporate risk-taking. Meanwhile, the characteristics of inquiry letters will also affect the promotion of corporate risk-taking. Furthermore, we find that state-owned property rights and political connections are not conducive to the regulatory role of inquiry letters, inquiry letter regulation improves the level of corporate risk-taking by alleviating the agency problem between shareholders and the management, and inquiry letters significantly improve investment efficiency.

This paper makes several contributions: Firstly, it makes complement to the relevant literature of non-penalty regulations by testing the economic consequences of inquiry letters in the new viewpoint of risk-taking. Secondly, it also enriches the studies of risk-taking behaviors, as the existing studies mainly focus on the internal and external environment. Thirdly, it has practical contributions by providing empirical evidence to affirm the effectiveness of non-penalty regulation methods, which helps to respond to the call of “innovating regulatory methods” proposed by the Report of the 19th National Congress of the Communist Party of China.