Financial Forecasting Market Reaction To The Disclosure Of Information And Control

The more capital market is developing, the more important theinformation disclosure will be. At present, the academe is focus on theresearch of historical information disclosure, and forecast informationresearch is relative rare. Based on the situation of Chinese capital market,this paper uses game theory, agency theory, information asymmetryhypothesis and public interest theory and so on to provide a complete,systematic and thorough research on the market reaction and regulation tothe financial forecast information disclosure, and adopts both normativeand positive research methods. There are six chapters in this paper: Chapter 1, the system background of financial forecast informationdisclosure. This chapter starts from the efficiency of Chinese capitalmarket and the history of financial forecast information disclosure system.Later, this chapter gives a full comparison of financial forecastinformation disclosure system in foreign advanced capital markets,including: disclosure pattern, disclosure content, disclosure format,forecast hypothesis and accounting policies, forecast period, amount, thedifference and renewal between financial forecast and fact, financialforecast audit system, laws and regulations etc. By comparison, we foundthat pure unconstraint disclosure is not preferable as the combination ofconstraint and unconstraint disclosure in most foreign countries. Thedisclosure format refers to the format of historical financial statement; theforecast content is comprehensive, including forecast balance sheet,forecast profit statement, forecast cash flow statement and their items;forecast information needs auditing. However, in our country, thefinancial forecast information is mostly earning forecast, simple andincomprehensive, lack of renewal system. This chapter provides factualbasis for the topic. Chapter 2, reference theories of financial forecast informationdisclosure. This chapter concludes the main ideas of financial reportobject theory, game theory, agency theory, signal theory, individualcontract theory and public regulation interest theory, to analyze theirenlightenment to the financial forecast information disclosure. The maincontent are: (1) Modern financial report object lies on social economicenvironment. We live in a complex economic environment, theinformation users depend more on information to make decisions. Thefinancial information becomes an useful tool for decision making andresource allocation. Compared to normal information, financial forecastinformation is more demanding. (2) Because of information asymmetry,there are interest conflict and game between management and investors.In their non-cooperate game, they decide on the other's decision. Thefinal Nash equilibrium will be: management discloses false financialinformation, and the investors not to invest. Thus, the governmentsupervision organization (such as CSRC) has to be involved and regulatethe disclosure, which lead to a monitor game between supervisionorganization and listed companies. The Nash disclosure of informationdisclosure regulation is related to the cost and benefit of the punishment.The heavy the punishment is, the more the social benefit and less illegaldisclosure will be; the higher the regulation cost is, the more illegaldisclosure will be. (3) there are unconstraint disclosure motivations inlisted companies. However, the common information asymmetry leads tosheep mentality and bubbles in capital market, adverse selection andmoral hazards. (4) In the situation of natural monopolization, publicpayout and externality, the market itself will lead to market failure. So thegovernment regulation is needed to correct the market failure, andimprove the resource allocation efficiency and social welfare. (5) Afterthe regulation, the financial forecast will be demanded by time period andcontent, as well as audit by third party (CPA) to insure its quality. Theunconstraint financial forecast will also demand the CPA audit due toagency cost. This chapter is the important theoretic basis for the topic. Chapter 3, the mark...