The Effect of Delisting Reform on Financial Risk Decision-making Behavior of Listed Companies in China: The Progressive Did Test Based on Empirical Data

In recent years, the Stock Exchange carried out a new round of delisting system reform under the background of marketization in China. Compared with the previous delisting rules, new delisting rules execute more strict and specific standards for the listing enterprises. It is sense to investigate the effect of delisting reform on the financial risk decision-making behavior of listed companies in China. Based on the progressive Difference in Difference (DID) model and theory of psychological reaction, this paper studies the impact of the new round of delisting reform on the financial risk decision-making behavior of listed companies, using data of A-share non-financial listed companies from 2017 to 2022. More than 26,466 panel data reclassified into two groups, the experimental group and the control group, according to different policy implementation time, using time fixed effect and individual fixed effect. It reveals that listed companies have higher Z-Score and liquidity ratio under the new stricter delisting rules, which indicates that the reform can motivate listed companies to take action to reduce their financial risks under the effects of the positive and negative feedback mechanism. It shows that the delisting reform has a more significant impact on non-state-owned listed enterprises than state-owned listed enterprises under the effects of self-interest maximization or the sense of social responsibility. It tells that the delisting reform has a more significant impact on main board listed enterprises than non-main board listed enterprises under the effects of information transmission mechanism. This empirical analysis shows that the main body of listed companies in China can make a positive reaction to the reform of the delisting system, tells that the policy goals of China's delisting system reform can be achieved to improve the quality of listed companies and establish a mechanism for the survival of the fittest. It has research value in theory and practical guiding significance for improving the delisting system of the stock market.