Introduction

The company secretary system in the Chinese capital market is based on the ‘company secretaries’ system in Western countries (Xing et al. 2019). Literature has shown big attention to the company secretary’s role in corporate decision making (McNulty and Stewart 2014; Peij et al. 2015; Nowlanda et al. 2021), and (Peij and Bezemer 2021) summarized as “the company secretary connects organizational decision-makers, oversees and manages information processes in and around the boardroom and ensures company compliance with statutory and legislative demands”. In addition to their core responsibilities, Chinese company secretaries have a crucial role in information disclosure. According to the Company Law (2006), company secretaries are tasked with preparing meetings between the board of shareholders and the board of directors, maintaining relevant documents, and overseeing information disclosure. The Rules Governing the Listing of Stocks (2008) further detail their duties related to information disclosure, which include: (1) promptly releasing company information to the public, (2) establishing and enhancing the company’s information disclosure system, (3) supervising compliance with information disclosure regulations by other managers, (4) coordinating information disclosure activities, (5) managing investor relations, and (6) implementing information disclosure practices. Thus, the company secretary plays a vital role in ensuring effective information disclosure (Sun et al. 2022; Xing et al. 2017).

However, the literature shows that in 80% of information disclosure violation penalty cases, the secretary is either unaware or powerless (Huang et al. 2023). This reveals a mismatch between the secretary’s responsibility and power (Wang and Yu 2017). Company secretaries are required to accumulate comprehensive professional and practical skills, which allows them to improve the quality of information disclosure. ‘Rules Governing the Listing of Stocks on Shanghai Stock Exchange’ and ‘Rules Governing the Listing of Stocks on Shenzhen Stock Exchange’ (2004) make clear that a board secretary should have financial, management, and legal knowledge. More importantly, Company Law (2006)) first established the company secretary’s status as a senior executive. Special positions have been created for company secretaries (Gao and Wu 2008). Enhancing the company secretary’s professional ability and status helps improve information disclosure quality and strengthens the ability of company secretaries to protect themselves from this ‘high-risk occupation’. Enhanced governance systems have expanded the role of company secretaries to encompass the full spectrum of planning, communicating, and verifying corporate visits to investors. These visits are crucial for investor relations management and the interpretation of company information (Xu et al. 2021).

This study examines the impact of Company Law (2006) on changes in a company secretary’s status, professional ability, and information disclosure violations. We find that the company secretary’s status has improved dramatically after 2006. We also find that improving the status of the company secretary helps reduce the occurrence and frequency of information disclosure violations. However, we also find that company secretaries with a higher status also increase collusion, which leads to more information disclosure violations, and the professional ability of the company secretary may exacerbate this phenomenon. Moreover, this study shows that powerful company secretaries who are involved in information disclosure violations can easily escape punishment.

This study contributes to the literature on corporate governance in three ways. First, to our knowledge, this is the first study to investigate corporate governance efficiency from the perspective of a company secretary’s compulsory compulsive status change. Company Law (2006) not only changed the qualification standard for the company secretary but also substantially changed the governance structure and principal-agent relationship of listed companies. Examining supervision efficiency from the perspective of company secretaries helps to identify the determining factors of information disclosure quality. Second, we investigate the effectiveness of the authorities’ error-correction system and analyze the interaction between internal and external governance mechanism changes in company secretaries’ information disclosure violations. Third, existing literature has investigated the role of the company secretary’s professional ability and status separately, while the company secretary with both high status and professional ability may be overconfident and increase the probability of violations. This study explores the interaction of the company secretary’s power and expertise with violations of information disclosure.

The remainder of this paper is organized as follows: the remainder of Section “Introduction” provides a literature review on the determination and consequences of information disclosure quality describes the theory and presents the hypotheses. Section “Data and methodology” discusses the data and methodology used in the study. Section “Main results” presents the empirical analysis. Section “Endogenous and robustness tests” presents the results of a series of robustness tests. Finally, conclusions are presented in Section “Conclusions”.

Literature review

Determination of information disclosure quality: the role of professional ability

The disclosure performance of company secretaries is primarily determined by their professional abilities. Luo (2016), Zhou et al. (2011), Mao et al. (2013), and Jiang et al. (2016) considered differences in professional ability as crucial factors affecting company secretaries’ performance. Regarding information interpretation, a company secretary with a high level of education significantly enhances the informativeness of site visits through their participation (Xu et al. 2021). Previous literature focuses on the role of the company secretary’s financial background and suggests that financial-related background may bring about higher conserve. Mao et al. (2013) found that a company secretary who also serves as a CFO can improve the quality of information disclosure and reduce stock price crash risk. Jiang et al. (2016) found that company secretaries with financial backgrounds help reduce information asymmetry and play an active role in addressing firms’ financing constraints, while professional company secretaries can reduce information asymmetry and enhance IPO firms’ investment value (Quan 2018). Quan et al. (2022) found that financial expert company secretaries significantly reduce firms’ receipt of ARCLs (Annual Report Comment Letters).

Company secretaries with a financial background tend to be more conservative in their approach. This conservatism arises partly from the stringent ethical standards they adhere to throughout their careers, making them acutely aware of the severe consequences of financial fraud (Lin et al. 2019). As a result, these secretaries are more likely to comply with regulations and deliver high-quality information, potentially decreasing regulatory violations. Additionally, their financial experience fosters a cautious mindset, which is essential in financial roles (Bamber et al. 2010). This caution translates into a more conservative assessment and management of risk (Finkelstein and Hambrick 1990), as well as a more thorough evaluation of potential outcomes (Jiang et al. 2009). Consequently, company secretaries with financial backgrounds are inclined to provide more accurate and reliable information, thereby enhancing the quality of information disclosure and mitigating issues in annual reports.

To ensure comprehensive and clear information disclosure, the Shanghai and Shenzhen Stock Exchange implemented policies in 2008 requiring all company secretaries to obtain a qualification certificate. Additionally, secretaries must participate the trainings which are organized by the exchange at least once per 2 years. These measures are intended to reduce the likelihood of illegal or unethical practices occurring in the field of management and of suspicions being submitted by the exchanges (Kubick et al. 2016). As a result, a company secretary with strong professional knowledge can develop a deeper understanding of company information and effectively fulfill their role as a powerful executive (Custódio and Metzger 2014). This policy particularly benefits those secretaries who hold concurrent executive positions, enabling them to carry out information disclosure more effectively (Li and Lee 2022).

Determination of information disclosure quality: the role of status

The ‘interests convergence hypothesis’ suggests that company secretaries with higher authority and shares can reduce agency problems and have more external information communication. Research indicates that company secretaries who also hold other senior executive titles have access to more internal information channels (Gao and Wu 2008; Gao and Wang 2015) and possess greater knowledge of firm-specific information (Chapman et al. 2019). This enhanced access and expertise enable them to improve the quality of information disclosure (Gao and Wu 2018). Zhai et al. (2014) and Liu et al. (2022) found that company secretaries who hold shares communicate more external information and disclose better.

The ‘trench effect hypothesis’ suggests that if the company secretaries hold shares of the firm, it will undermine their independence, and the ‘insider control’ problem increases. Zhou et al. (2011) found that disclosure quality will decline if company secretaries hold shares in the firm. Zhao and Gao (2014) indicated that executive power has a significantly negative impact on information disclosure quality, especially in firms with weak competitiveness in the product market.

Improving disclosure quality depends on the executive’s diligent fulfillment of their responsibilities (Zhou et al. 2011). This, in turn, enhances the effectiveness of the capital market by reducing information asymmetry. Other company secretary characteristics related to power also affect information disclosure. Research indicates that company secretaries with higher reputations, greater social influence, and longer tenures contribute to more readable annual reports (Sun 2019). Furthermore, a longer tenure for company secretaries is associated with a lower incidence of fraud and lawsuits (Wang et al. 2019); elevated compensation for company secretaries diminishes the risk of information disclosure violations and enhances the quality of disclosures (Peng et al. 2019). Company Law (2006) first confirmed company secretaries as top executives, indicating that company secretaries are more powerful than before and help them improve information disclosure quality. Zhou (2011) found that the overall quality of information disclosure by listed firms has significantly improved since the new Company Law confirmed the senior executive status of company secretaries.

The consequences of information disclosure violations

Existing research shows that executive replacement is an important mechanism in both internal and external governance (Huson et al. 2001). Offense executives would be punished by outside authorities or replaced internally (Cowen and Marcel 2011). Compared to external governance, a firm’s internal governance mechanisms, especially those through the board of directors and institutional investors, are helpful, complementing the market in constraining the behaviors of executives (Pound 1992) or weakening it as market pressure decreases (Hadlock and Lumer 1997; Mikkelson and Partch 1997). Replacing offending executives is also an effective way of reducing negative economic consequences. As corporate violations raise questions about insufficient board monitoring and management negligence (Srinivasan 2005; Kang 2008), outsiders also question the quality and competitiveness of all executives (Kang 2008; Wiesenfeld et al. 2008), which affects their future careers (Pozner 2008). Srinivasan (2005) found that almost half of the independent directors resigned after an act violation, and the resignation even extended to other departments, such as the audit committee, which may be responsible for the violations (Arthaud-Day et al. 2006). These studies show that the board tries to recognize mistakes and correct corporate governance deficiencies by replacing offending executives and re-emphasizing the legitimacy of the organization (Arthaud-Day et al. 2006; Cowen and Marcel 2011), which can pass on the signal of strengthening governance (Pozner 2008; Kang 2008).

Replacing offending executives may help companies reduce negative impacts, and previous studies have suggested that board replacement is also selective. After violations, the board of directors keeps resource-based executives and dismisses non-resource-based ones because the former can help the firm access financing sources and other operating conveniences (Higgins and Gulati 2003; Lester et al. 2006). When faced with highly uncertain risks, a resource-based executive can help the firm consolidate the relationship channels with external resource providers (Certo 2003; D’Aveni 1990). Furthermore, Qu et al. (2012) suggested that founders have a special status in the company. If there is a violation, the founder is internally protected, which enhances the ‘scapegoat effect’ and weakens the ‘chain effect’. Du et al. (2013) found that a company secretary with higher shares or who serves as an executive significantly lowers the probability of abnormal turnover.

Institutional background and research hypothesis

Research indicates that insufficient information disclosure can stem from two distinct strategies. The first, a passive approach, occurs when information disclosure staff lack a comprehensive understanding of relevant information due to their lower-level positions or insufficient professionalism (Huang et al. 2023). The second, a proactive approach, involves staff intentionally concealing information to further their personal interests (Xu et al. 2014; Kim et al. 2016).

Before 2006, fulfilling the six major responsibilities of the company secretary required professionalism and an appropriate functional status. However, the role was often inadequately performed due to a mismatch between rights and responsibilities (Wang and Yu 2017). The full-time company secretary lacked genuine power and was ranked relatively low among executives (Wang et al. 2019). As a result, other executives often concealed bad news for personal gain, driven by agency costs (Callen and Fang 2017; Jin and Myers 2006). This context made it extremely difficult for a company secretary to excel in information disclosure (Huang et al. 2023). After violations were discovered, the offending company secretary could easily become the ‘scapegoat’ and bear the punishment (Liu and Zhao 2014). In this case, the company secretary relied more on professional ability to reduce the probability of violations and protect themselves.

To address this issue, the Company Law (2006) promotes the appointment of executives with genuine authority to also serve as company secretaries in listed companies. Enhancing the governance efficiency of the company secretary system can mitigate the problem of ‘vulnerable pseudo-executives.’ Holding a higher-ranking position is expected to improve the understanding of company information and lead to more effective information transmission (Chen et al. 2011). Nevertheless, even if a company secretary is well-positioned and has access to accurate and comprehensive information, substantial improvements in information disclosure quality are challenging if the individual chooses to withhold information (Huang et al. 2023). Furthermore, the company secretary’s independence may be compromised if they hold additional roles on the board (Wang et al. 2019) or own shares (Zhao and Wen 2022). Such lack of independence exacerbates agency problems and increases agency costs, thereby diminishing the quality of information disclosure (Li et al. 2022). Consequently, this facilitates the formation of alliances among senior management that can collectively harm investor interests. The higher the level of professional ability, the more ‘collusion’ is facilitated. Therefore, the choice between ‘self-protection’ and ‘collusion’ depends on the interest convergence between the company secretary and the firm. In summary, the ‘self-protection effect’ or ‘collusion effect’ depends on the company secretary’s substantive status and professional ability. A lower status combined with a higher level of professional ability leads to the ‘self-protection effect’ for the company secretary; a higher status combined with a higher level of professional ability leads to the ‘collusion effect’ for the company secretary. Thus, we propose,

H1

Company Law (2006) reduces information disclosure violations within the company secretaries with higher positions or higher professional ability and increases information disclosure violations within the company secretaries with both higher positions and higher professional ability.

Stakeholder-agency theory posits that managers prioritize stakeholders' interests with greater power (Zolotoy et al. 2021). Managers tend to make decisions framed as addressing the interests of stakeholders who can significantly undermine organizational legitimacy and reduce access to resources (Zolotoy et al. 2021; Mitchell et al. 2016).

According to the managerial power theory (Bebchuk et al. 2002), company secretaries with executive titles have a higher status in the firm. Therefore, offending company secretaries with higher status may be good at concealing violations and escaping penalties. Furthermore, from the perspective of internal corporate governance, high-ranking offending company secretaries are also resource-based executives who may be difficult to let go of. Thus, offending company secretaries with higher professional abilities and less access to resources are more likely to be replaced. After 2006, the external regulatory environment improved rapidly, and the status of company secretaries improved. Therefore, company secretaries with higher positions and higher professional abilities are more likely to collude with the firm, and the firm may help the offending company secretaries conceal their violations, which increases the probability of internal takeover and reduces external punishment. Thus, we propose,

H2

Company Law (2006) increases the probability of offending company secretaries with higher expertise or/and higher positions being punished internally and reduces the probability of offending company secretaries with higher expertise or/and higher positions being punished externally.

Data and methodology

Data and sample

We started with the information disclosure violation database for the period 1999–2015.

Our data began in 1999 when the resumption of executives was publicly disclosed since 1999. We used 10 years of data after the enactment of the law to find changes in the impact of corporate secretarial characteristics on information disclosure violations. We manually collected the professional ability and position data of company secretaries from executives’ resume disclosures using the CSMAR database. We collected data on the Big 10 accounting firms from the official website of the China Institute of Certified Public Accountants. We excluded samples from the financial insurance industry and missing observations and eventually obtained a total of 32,319 firm-year observations, among which the occurrence of information disclosure violations occurred 3148, accounting for 9.74% of all observations. We winterized all the continuous variables at the two extreme percentiles.

Methodology

Test of H1

To test H1, we divided the full sample into two subsamples: a subsample of years 1999–2005 and a subsample of years 2006–2015. Then, we estimated the following logit (ordinary least squares) regression model:

$$\begin{gathered} Ivl_{{{\text{it}}}} (Sumivl) \hfill \\ = \alpha + \beta_{1} Exper_{{{\text{it}}}} + \beta_{2} Status_{{{\text{it}}}} + \beta_{3} Exper_{{{\text{it}}}} *Status_{{{\text{it}}}} + \beta_{4} Controls_{{{\text{it}}}} + \varepsilon_{{{\text{it}}}} \hfill \\ \end{gathered}$$
(1)

where subscripts i and t denote firm i and year t, respectively. Ivl is an indicator equal to 1 if the company secretary violated the information disclosure regulation during their tenure. Sumivl represents the frequency of information disclosure violations during a company secretary’s tenure. Exper is the sum of five professional abilities: professional background, professional experience, industry experience, size experience, and compensation experience. The professional background takes the value of 1 if the secretary also serves as a financial, legal, operational, or investment director, and 0 otherwise; professional experience takes the value of 1 if the tenure of the company secretary is more than three years (median), and 0 otherwise; industry experience takes the value of 1 if the company secretary serves more than one industry (median), and 0 otherwise; size experience takes the value of 1 if the company secretary serves a large firm (median), and 0 otherwise; experience compensation takes the value of 1 if the company secretary is paid higher than the median payment to executives, and 0 otherwise. Exper ranges from 0 to 5. Status is an indicator equal to 1 if the company secretary also serves as chairman of the board, chairman of the supervisory committee, CEO (vice), or a director who has real power, and 0 otherwise. All other variables are provided in Appendix 1.

Test of H2

To test H2, we estimate the following logit regression model for the subsample of the year 1999–2005 and the subsample of the year 2006–2015, respectively:

$$\begin{gathered} Punish\;(Turn) \hfill \\ = \alpha + \gamma_{1} Exper_{{{\text{it}}}} + \gamma_{2} Status_{{{\text{it}}}} + \gamma_{3} Exper_{{{\text{it}}}} *Status_{it} + \gamma_{4} Controls_{{{\text{it}}}} + \varepsilon_{{{\text{it}}}} \hfill \\ \end{gathered}$$
(2)

where subscripts i and t denote firm i and year t, respectively. Punish is an indicator equal to if the offending company secretary is punished by the China Securities Regulatory Commission (CSRC), and 0 otherwise. Turn is an indicator equal to 1 if the offending company secretary is replaced and 0 otherwise. All other variables are provided in Sect. “Test of H1”, and Appendix 1.

Main results

Descriptive statistics

Figure 1 shows the changes in the professional abilities and statuses of company secretaries from 1999 to 2015. Figure 1 indicates that the professional abilities of company secretaries improved steadily before 2006 and improved significantly after 2006. Figure 1 also shows that the proportion of company secretaries with real power increased steadily and significantly after 2006. Figure 1 suggests that with the implementation of the ‘Company Law’ (2006), the company secretary’s professional ability and status have increased dramatically.

Fig. 1
figure 1

Changes in company secretaries’ expertise and status

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Table 1 summarizes the descriptive statistics. Approximately 9.70% of the firms violated information disclosure. The mean (median) frequency of information disclosure violations was 3.074 (2), indicating that information disclosure violations remain an obstacle to capital market efficiency. The mean (median) level of the company secretary’s professional ability was 1.31 (1), indicating that most company secretaries had a low level of expertise. The mean (median) level of a company secretary’s status was 0.5 (0), indicating that more than 50% of the secretaries have real power. The mean (median) number of incidences when the offending company secretary was punished by the CSRC was 0.329 (0), and that of incidences when the company secretary was replaced was 0.551(0), indicating that an internal takeover is more effective than regulatory punishment. The mean (median) number of positions held by the company secretary was 1.663 (2), indicating that most secretaries have multiple jobs. The average age of the secretaries was 42 years, and more than 80% were male. Approximately 38.80% of the firms employed the Big 10 audit firms, and 93% obtained standard unqualified audit opinions. The average size of the board of directors was 9.201; the average size of the company was 21.663; the average asset-liability ratio was 47.90%, and the average return on assets was 3.00%.

Table 1 Descriptive statistics
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Regression results

Table 2 reports the impact of the professional ability and status change of the company secretary on information disclosure violations. Before 2006, the coefficient of exper (− 0.008; t = − 0.18) suggests that the higher professional ability of the company secretary decreases the probability of information disclosure violations. The coefficient of status (0.311; t = 1.96) suggests that a higher position significantly increases the probability of an information disclosure violation. The coefficient of the interaction term exper*status (0.072; t = 0.85) indicates that a higher position decreases the probability that a company secretary with more expertise violates information disclosure regulations. After 2006, the coefficient of exper (0.006; t = 0.20) suggests that higher professional ability of the company secretary increases the probability of information disclosure violations. The coefficient of status (0.022; t = 0.24) suggests that a higher position increases the probability of information disclosure violations; however, this coefficient is not significant. The coefficient of the interaction term exper*status (0.150; t = 2.90) indicates that a higher position significantly increases the probability of a company secretary with more expertise violating information disclosure regulations after 2006. The results suggest that the Company Law 2006 improves the status of company secretaries and aligns their interests with the company, which leads to a more serious ‘collusion effect’ after 2006.

Table 2 Influence of the changes in company secretaries’ expertise and status on information disclosure violations
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Table 3 reports the impact of the professional ability and status change of the company secretary on the frequency of information disclosure violations. Before 2006, the coefficients of exper and status were 0.004(t = 0.05) and 0.032(t = 0.09), respectively. The coefficient of the interaction term exper*status (− 0.186; t = − 1.01) indicates that a higher position decreases the probability of a company secretary with higher expertise violating information disclosure regulations frequently. After 2006, the coefficients of exper and status were 0.239 (t = 4.57) and − 0.631(t = − 3.74), respectively, both significant at the 1% level, suggesting that higher professional ability of the company secretary significantly increases the probability of frequent information disclosure violations, while a higher position decreases the probability of frequent information disclosure violations. The coefficient on the interaction term exper*status (− 0.482; t = − 2.16), significant at the 5% level, indicates that a higher position increases the probability of the company secretary with higher expertise violating information disclosure regulations frequently after 2006. The results in Table 3 provide additional evidence for H1.

Table 3 Influence of the changes in company secretaries’ expertise and status on the frequency of information disclosure violations
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Table 4 reports the impact of changes in the expertise and status of the company secretary on regulatory punishment. Before 2006, the coefficients of exper and status were − 0.083 (t = − 0.75) and 0.311 (t = 0.89), respectively. The coefficient on the interaction term exper*status (− 0.220; t = − 1.10) indicates that a higher position mitigates the probability of the offending company secretary with higher expertise being punished by regulators. After 2006, the coefficients of exper and status were − 0.111 (t = − 1.79) and − 0.042 (t = − 0.22), respectively, and the coefficient of exper was significant at the 1% level, which suggests that higher professional ability of the company secretary decreased the probability of the offending company secretary being punished by regulators. The coefficient on the interaction term exper*status (− 0.018; t = − 0.16) indicates that a higher position decreases the probability of the company secretary with higher expertise being punished by regulators. The results in Table 4 provide evidence for H2. The findings align with existing literature on agency problems, suggesting that company secretaries linked to poor corporate governance, including inadequate disclosure quality, are less likely to be terminated.

Table 4 Regulatory punishment of the offending secretary
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Table 5 reports the impact of changes in the expertise and status of the company secretary on the internal takeover. Before 2006, the coefficients of exper and status were 0.258 (t = 2.43) and 0.306 (t = 0.80), respectively, and the coefficient of exper was significant at the 5% level. The results suggest that the higher professional ability of the company secretary significantly increases the probability of the violation by the offending company secretary being dismissed. The coefficient on the interaction term exper*status (− 0.070; t = − 0.33) indicates that a higher position decreases the probability of the offending company secretary with higher expertise being replaced internally. After 2006, the coefficients of exper and status were 0.188 (t = 3.35) and 0.118 (t = 0.66), respectively, and the coefficient of exper was significant at the 1% level. The results suggest that a higher professional ability of the company secretary increases the probability of the offending company secretary being replaced internally. The coefficient of the interaction term exper*status (0.065; t = 0.62) was positive, but not statistically significant. The results indicate that Company Law (2006) increased the replacement risk of offending company secretaries. The results in Table 5 provide additional evidence for H2.

Table 5 Internal takeover of the offending company secretary
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Endogenous and robustness tests

Test for endogeneity

To address the endogeneity problem caused by sample selection bias, we used PSM to mitigate the concerns. Figures 2 and 3 show the propensity scores before and after matching, respectively, at a ratio of 1:1. The propensity scores of the sample after matching almost coincide with those before matching. Table 6 reports the influence of a company secretary’s expertise and status change on information disclosure violations after PSM matching, which is consistent with the results in Table 2.

Fig. 2
figure 2

Propensity score before PSM

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Fig. 3
figure 3

Propensity score after PSM

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Table 6 Influence of the changes in company secretaries’ expertise and status on information disclosure violations, after PSM
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Robustness test

In addition to information disclosure violations (Ivl) and frequency of information disclosure violations (Sumvil), the interval of punishment (Ivlgap) is an important alternative proxy for measuring regulatory efficiency. Table 7 reports the results of the alternative proxy for the interval between the investigation and punishment for violations (Ivlgap), which are robust and consistent with previous conclusions.

Table 7 Alternative proxy test
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Conclusions

This study examined the regulatory effects of Company Law (2006). Our findings indicate that a company secretary with a lower rank faces greater duty-related risks and is more likely to become the ‘scapegoat’ for corporate violations. Before 2006, the requirement of self-protection for most low-status company secretaries led to the ‘self-insurance’ effect in the capital market, and more information disclosure violations occurred among powerful company secretaries. Following the significant enhancement of the company secretary’s status after 2006, information disclosure violations decreased among those with either higher positions or greater professional ability, but increased among those who possessed both higher positions and greater professional ability. Furthermore, the offending company secretaries with higher expertise or higher positions were replaced internally after 2006, which reduced the probability of being punished externally. Thus the ‘collusion’ effect has been a remarkable feature in the capital market after 2006. Our findings are robust to the interval between the investigation and the punishment for violations.

This paper offers a thorough exploration of stakeholder-agency and agency theories, showing that firms with influential executives who also hold the position of board secretary tend to face higher agency costs and are less likely to see executive dismissals. These findings have implications for corporate governance, information disclosure, and violation control. Our results will benefit regulators, directors, and investors.