Market Reaction, Value And Impact Factors

Annual Financial Statement is one of the most important information sources of listed company to outside investors. Accounting information must be reliable and timeliness. However, there is a unique phenomenon in China stock market. Listed companies often make supplement or correction to the financial statement they just released. These supplements and correction announce are called financial statement patch. There is few study about this phenomenon at present, especially in positive study.The first part of this paper is about the market reaction of the financial statement patches. Through event study, I find that there is a significant positive market reaction on Good News patch and a significant negative market reaction on Bad News patch. Although there is no significant abnormal returen on Uncertain News patch samples, but the abnormal trade volume indicate that these patches are also informative. Then I studied the facts which can affect the degree of the market reaction.The next part of this paper is about the value relevance of financial statement information of the sample companies which have released financial statement patches. My conclusion is that the financial information quality of these companies is lower than others.Finally, this paper analyzes the outside and inside facts about the probability of financial statement patch. The legal system on investor protection, the regulation on market and the auditor are outside facts. And better corporate governance will lower the probability of financial statement patch. ST Companies and young listed companies release more financial statement patch than other companies.