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Research on the Issues of Financial Restatement of Listed Companies

Author: LiuXianChun
Tutor: FuRong
School: Dongbei University of Finance
Course: Accounting
Keywords: financial restatements correction announcement supplement announcement supplement and correction announcement accumulative abnormal return
CLC: F832.51
Type: Master's thesis
Year: 2011
Downloads: 462
Quote: 1
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Abstract


Capital market is an important place for the allocation of resources. The accounting information disclosure system is an important guarantee for the effective operation of capital market. Financial statement is important source for each related group to acquire information of financial position, operating results and cash flows. However, in recent years the emergences of financial restatement in Chinese listed companies arouse wide concerns of the domestic scholars. Financial restatements Show that there are information omissions or mistakes in financial statements which listed companies have disclosed. It can mistake investor, go against the reasonable allocation of resources and the effective operation of capital market. Therefore, from the view of financial restatements of listed companies, the research on China’s disclosure quality has strong theoretical significances and practical values.This paper adopts normative research and statistical analysis method. Based on the analysis about the current situation of the financial restatement, this paper adopts the event study to observe financial restatements how to effects stock price. At last this paper provides some policy suggestions on disclosure and supervision of the financial restatement.Therefore, this paper is divided into five chapters. The main contents of each chapter are as follows.The first part, the introduction. Firstly, the research significance and issues of this chapter are introduced. Secondly, this paper reviews relevant literatures, including the cause, market response and company characteristics of financial restatement. Besides, this chapter states the research methods and contents of this paper.In the second part, the theoretical analysis of the financial restatements. In this chapter, the author defines the connotation of the financial restatement. Financial restatement refers that the existing information omissions, falsity or misleading information in the published financial statements, listed companies are voluntary or ordered by auditor and regulators to modify. In china, the form of financial restatement is restated temporary announcement, which includes the supplement announcement, correction announcement, supplement and correction notice. Second, this chapter analyzes the financial statements of china and the United States, and the two systems are compared. At the same time, based on effective market theory and information asymmetry theory, this paper analyses the response of stock prices to financial restatements and agents disclose false financial information.The third part, the statistical analysis of present situation on financial restatement. This chapter researches the present situation from the following eight aspects:the annual distribution, restated frequency type, industry distribution, restated reason, restated content, the nature of the restatement, influence of restatements on accounting earnings.The fourth part, the test of financial restatements to the stock prices influence. This chapter adopts the event study method. This paper researches the whole influence to stock prices as well as the influence of the different types of restatement to stock price by analysing the daily abnormal return and accumulative abnormal return in window period.Part five, research conclusions and policy suggestions. Based on the conclusion, this chapter put forward some suggestions to perfect financial statements system from the company level, market level, government level and investors. In the company level, should be constantly improve corporate governance; in the market level, we should make use of the role of the independent audit; in the government level, we should strengthen the supervision. Investors should enhance the philosophy of value investment and maintaining rights and interests. Through the study, this paper concluded the following main conclusions:(1) There are 13.15% of the listed company released all kinds of financial restatements announcements from 2008 to 2010, so the phenomenon of restatements is much more serious. The highest proportion of is correction announcement, more than 60%; 39.45% of financial restatements announcements are the bad news, bad news in correction announcement rates is as high as 51.35%; More than 30% of the correction announcement adjusted the surplus, usually involves reducing company previous annual earnings by a large margin. Financial restatements are in bad conditions in quantity and quality, restatement events have very serious influences to the capital market.(2) In the window period, financial statements have significant effects to the stock price on the whole. This shows that our financial restatements of listed company reduced the market value of a listed company in a certain extent and hurt investors interests.(3) In the window period, different types of financial restatement leading to the average accumulative abnormal return are negative. This shows that different types of restatements have negative effects to stock prices, and the degree of the influence of different types to stock price are different.

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CLC: > Economic > Fiscal, monetary > Finance, banking > China's financial,banking > Financial market
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