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Strategic Public Shaming: Evidence from Chinese Antitrust Investigations

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This article examines strategic public shaming, a novel form of regulatory tactics employed by the National Development and Reform Commission (NDRC) during its enforcement of the Anti-Monopoly Law. Based on analysis of media coverage and interview findings, the study finds that the way that the NDRC disclosed its investigation is highly strategic depending on the firm’s co-operative attitude toward the investigation. Event studies further show that the NDRC’s proactive disclosure resulted in significantly negative abnormal returns of the stock prices of firms subject to the disclosure. For instance, Biostime, an infant-formula manufacturer investigated in 2013, experienced -22% cumulative abnormal return in a three-day event window, resulting in a loss of market capitalization that is 27 times the ultimate antitrust fine that it received. The NDRC’s strategic public shaming could therefore result in severe market sanctions that deter firms from defying the agency.