The Supervision Of False Representation On Financial Forecast Information In Listed Company

The largest value of the economy society is in the future (Humphrey). Compared with general accounting information, the financial forecasting information has more decision-making correlation, and can reflect the future value of the company. The disclosure of financial forecasting information in listed company's can reduce the degree of information asymmetry between company's management authorities and information users, and can also predict and judge the enterprise's risk, reduce the transaction costs, it is the communication "Bridges" for the social public companies, investors and the public. However, there appeared the false representation behavior for financial forecasting information in listed company In China, and can't be prohibit repeatedly, violates the principle of good faith seriously, even ignore better. This will not only bring small investors huge economic losses, but also brings a series of problems, such as the alienation of financial forecasting information, the inequality of supply and demand, the increased of transaction cost, etc. This leads to the Low- quality and inefficiency of financial forecasting information, and is bad to the steady and sound development of stock market. In addition, the supreme people's court release the several provisions on the trial of the civil damages cases in securities market for misrepresentation in January 9,2003. It indicates that civil litigation to the incur investors is possible because of the false statement behavior for financial forecasting information in listed company In China, and bear corresponding responsibility for compensation. Therefore, this needs to strengthen the supervision of financial forecasting information in listed company. Through the reasonable arrangement of system, on the one hand, it can encourage the listed company to disclosure financial forecasting information more fully and realistic; on the other hand, it can impose legal and institutional constraints to the disclosure in false or misleading information and does not damage the honest management's enthusiasm of discoursing financial forecasting information, and can prevent investors for putting forward the litigation for goodwill disclosure of information.The paper based on stock market conditions of China, used The United States stock market as a reference,, based on the quality and features of the financial forecasting information, combined with accounting, law and economics, put Normative research methods and Empirical research methods together, defined and analyzed the false statement behavior and its economic consequence of listed companies. This balanced the support of listed companies'financial forecasting information and the supervision of false statement behavior of the financial forecasting information. The paper used as a reference for drawing up and improving the preparation of financial forecasting information guideline, accounting standards and auditing standards of China.Main ideas of this paper can be summarized as follows:(1) The financial forecast information is a kind of evaluation and outlook of the future financial information that related decisions (the future financial information mainly include financial position, operating results and cash flows, etc.), it reflects the relationship of the established facts and future facts of enterprise financial information. The financial forecasting information has strong decision relevance, uncertainty and risk characteristics. It is essentially a commodity which reflects a certain social relations.(2) Defined of false statements on the financial forecast information including three levels of content: First, the authenticity of the financial forecast information is generally not directly applicable to the identification of "objective reality". It should be based on accounting standards and legal standards for judging whether the financial forecast information is true. Accordingly, the criteria of a false statement should be "legal truth"—whether is a violation of the relevant securities laws and regulations. Second, this law should be a major event. Although the identification of focus of accounting and legal is different, there are two main criteria which are "Investor decision-making" standards and "a significant impact on stock prices" standard. The essentially of these two standards are the same, but There still exist differences inevitably under the existing conditions of our country's stock market. At present, the securities market in China is still in the stage of weak form efficient market and the "Investor decision-making" standards should be adopt to identify the major matters of financial forecasting information false representation. Only when the securities market is in the stage of semistrong-form efficiency, it is feasible to adopt both "Investor decision-making" standards and "a significant impact on stock prices" standard. Third, the financial forecast information including false statements, misleading statements, material omissions and improper disclosure. Therefore, all listed companies comply with the disclosure of financial forecasts information on these four specific forms, in line with "materiality standard" and "reasonable person standard," and caused a loss of information users, the act constitute misrepresentations, it belong to be violations, and the perpetrator should bear tort liability.(3) The financial forecast information of listed companies to make false statements of the main factors include internal factors and external factors influence both. Internal factors include two aspects:firstly, inner uncertainty of the financial forecast information caused the existence of objective differences; secondly, listed company's internal motivation leads to false representation behavior. Listed company's internal motivations include the control of large shareholders, insider trading, and the earnings management. External factors include uncontrollable factors change, the impact of capital market efficiency and the lack of effective supervision.(4) The false representation behavior of financial forecast information of listed company has economic consequences. The main conclusions are as follows:Firstly, the market had the obvious response on the false representation of financial forecast information of listed company, and the most signal effect had been achieved in a short time window. This shows that through years of development, China's securities market efficiency has been greatly improved, but the misrepresentations of the listed company's financial forecasts would give larger risks to investors. Secondly, transfer effects of the financial forecast information associated with the direction of earnings changes, such as cases of good information about the company can bring a higher abnormal return, and accordingly investors or management who catch the insider information will have more arbitrage opportunities, but this arbitrage opportunities mainly reflected prior to the information disclosure. Thirdly, the regulatory penalty notice have the market response, stock prices have a certain extent fall, excess returns and cumulative abnormal declining in a short time window. To some extent, we can find the economic consequences from the listed company's financial forecasts that the misrepresentations to investors and information content of regulatory penalty notice. The false statement behavior of listed company can lead to low-quality and inefficiency of financial forecasting information, and cause a series of problems:the inconformity of essential and form of financial forecasting information, the dissimilation of financial forecasting information, the inequality of demand and supply of financial forecasting information, and the transaction cost of financial forecasting information increases, etc. These problems will affect the overall effectiveness of accounting information and the optimization of resources in capital market.(5) The regulatory system of American main characteristics is "safe harbor rules" and "pre-warning principle". It's the main spirit is the encourage policies. The regulatory system of American had a more complete and efficient system for information disclosure and supervision, summarized its experience as follows:First, the content of information on the financial forecast information had been completely defined; Second, established standards to distinct forward-looking information and predictive information, forward-looking information adopt compulsory disclosure, predictive information adopt voluntary disclosure; Third, established "safe harbor rules" and "pre-warning principle"; Fourth, standardized the forecast period; Fifth, established a more mature system that the financial analyst forecasts as the main subject of independent experts; Sixth, established management responsibility for the preparation of financial forecast information and the CPA's audit responsibilities; Seventh, established a better financial forecast criteria. We can learn some successful experiences from the United States, combined with our special situation and market conditions, inspiration can be summarized as follows: First, to strengthen the regulation of financial forecast information on false statements, such as establish a sound regulatory system of disclosure and supervision, correct property rights arrangement, establish the responsibility of corporate management, accounting firms and certified public accountants, etc., in order to improve the quality of financial forecast information and protect the interests of investors; Second, encourage listed companies to disclose financial forecast information to meet the needs of information users, such as establish the safe harbor rules under the reality of China's securities market, protect the legitimate rights and interests of the issuer. Establish and improve the information needs expression mechanism of financial forecast information, strive to cultivate an authoritative, independent, highly qualified team of financial analysts, ensure effective and adequate supply of the financial forecast information. In the special environmental conditions, we should temporarily take compulsory measures, such as adhere to the mandatory disclosure of earnings forecast information.(6) The supervision on the listed company's misrepresentations of financial forecast information must be closely integrated economic system, legal environment, cultural background and listed companies present and future, and create the regulatory system with Chinese characteristics that should be composed of government supervision, judicial supervision, self-regulation, public oversight and other policies in order to improve the validity of the financial forecast information. Reflected in specific measures:First, establish a sound regulatory system of norms of financial forecast, that China's information disclosure of listed companies and the evaluation of the quality of their disclosure and regulatory have rules to follow. Second, correct the financial forecast information property rights arrangements, clear the main responsibility of government supervision, judicial supervision, self-regulation, public oversight to ensure checks and balances of power and the orderly operation of information property rights system. Third, adhere to the combination of mandatory disclosure and voluntary disclosure, but should pay attention to the markets-oriented role of profit forecast information in the capital. Due to the information has the properties of public goods at this stage, in order to prevent the manipulation of administration and the insider trading, we should adopt mandatory disclosure on the profit forecast information. This is based on the actual situation of China's capital market and is the realistic choice, when China's capital markets reach semi-strong form efficient market conditions; voluntary disclosure is the rational choice. Fourth, establish the safe harbor rules that match the reality of China's securities market, define the scope of safe harbor protection, reducing the issue of good honest people who risk of litigation or audit. Fifth, clear corporate management's responsibility for the preparation and accountants audit responsibility of the financial forecast information. Sixth, establish exemption system of financial forecast information; combine the process-oriented regulation with the result supervision. Seventh, establish and improve the mechanism of needs expression of financial forecast to change the supply "for non-required" phenomenon of listed companies in China and ensure the validity and the authenticity of the information. Eighth, improve the internal governance of listed companies and contain the misrepresentations from the internal. Ninth, develop an authoritative, independent, high-quality team of financial analysts, financial analysts give full play to the role of the financial forecast, form of the competition in supply market, ensure the supply of information sources and improve its quality. Tenth, with the help of experts and public opinion, promoting the accounting market to be sound, healthy and efficient.