The impact of inquiry letters on IPO success : an empirical analysis based on the STAR market in China

Abstract

Motivated by the need to understand how regulatory attention influences firms’ disclosure practices, particularly in high-tech industries, this study examines the relationship between the inquiries made by the stock exchange and the probability of IPO success in the STAR Market in China. Using a comprehensive data set of 661 companies from the initiation of the STAR Market until July 1, 2023, this research explores how the intensity of regulatory scrutiny, as reflected by the number of questions and rounds of inquiries, affects IPO outcomes. Additionally, the study delves into the mediating role of accounting information disclosure density and the role of inquiry letter visualization. The findings show that increased regulatory scrutiny enhances transparency and improves a company’s chance of a successful IPO, especially when firms respond with detailed disclosures and an appropriate use of visualized data. The study provides important policy insights, suggesting that regulators and firms should continue encouraging comprehensive information disclosure while ensuring that the use of visual aids is balanced and supports clarity, particularly for firms in less developed regions and technical industries.