Financial report similarity and the likelihood of administrative punishment:based on the empirical evidence of textual analysis

This paper uses A-share non-financial listed companies in the Chinese Stock Exchange from 2008 to 2016 as a sample and investigates the influence of financial reports similarity on the likelihood of administrative punishment. The empirical result shows that the greater similarity to the last MD&A, the higher probability of administrative punishments for fraud firms; and the greater similarity to the last Non-MD&A, the lower probability of administrative punishments for fraud firms. Namely, regulatory agencies pay more attention to the information content of MD&A and the stability and compliance of Non-MD&A respectively. Further analysis shows that state property rights can mitigate the positive relationship between MD&A similarity and the likelihood of being punished, and better textual readability can aggravate the negative relationship between Non-MD&A similarity and the likelihood of being punished. Finally, after considering the review and preview part of MD&A, the corporate governance and accounting policy part of Non-MD&A respectively, the conclusions still stand. This paper provides empirical evidence for governments to promote policies about regulatory enforcement and information disclosure.