The Information Content Research Of Earnings Information Announcements In The OTC Market

After years of efforts and development, the capital market of China has now formed boards of different positioning, consisting of the main board, the small and medium enterprises board, the GEM (Growth Enterprises Market) board, the OTC market and so on. OTC market, also called the Over-The-Counter market. It works for the enterprises in the growth stage and the small and mini enterprises to raise a large of initial capital. The main body of the OTC market in China is made up of high new technique enterprises which are established by the forms of the science park from all over the country. And the New Third Board in the Agency Share Transfer System of the Shenzhen Stock Exchange is exactly the typical model of the OTC market of China. Now, the OTC market of China has an embryonic form.Through the investigation and statistics, the paper found the Characteristics and laws in the OTC Market of China are as follows. Firstly, the current OTC market research scope can only tend to the New Third Board. Although the scope of the OTC market of China is more extensive,(consisting of the New Third Board, the Old Third Board, the B-Board delisting transferred enterprises, and the non-listed enterprises form84new sciences and technology park of China), research range can only be limited to the New Third Board enterprises. The reason is that the Old Third Board enterprises and B-Board delisting transferred enterprises were delisted companies. Their financial situation was not well. And other OTC market enterprises created by alone places had not publicly available data. Or, the data is difficult to obtain. Secondly, According to all sample week average abnormal return AAR distribution, I determine that the OTC market CAR window period is generally before or after the report date [-2,+2] week.The generalized earnings information data sets in the OTC market consist of direct and indirect earnings information. The direct earnings information is that the investors and the users of financial statements by enterprise financial report can direct inquiries or simple plus and obtain. The indirect earnings information is that the investors or the users draw new earnings information on applying complex processing and calculation.The generalized unanticipated earnings of the OTC market performed as the information bedyond the expectations of investors profit increment which are caused by direct and indirect earnings information. The generalized unanticipated earnings equal to the difference between the generalized earnings disclosure numbers and corresponding normal expected earnings. The normal expected earnings can choose analysts predict earnings, previous earnings Et-1, or the industry average profit. However, there is a particular state in the OTC market which is the normal expected earnings E is equal to0. When it happens, the UE is equal to a static earning. As the OTC market just formed soon, there are not analysts forecasts, industry reports and reliable data can be acquired temporarily. Therefore, only the△EPS and△RIPS of dynamic earnings, the EPS and RIPS of static earning of special market state, can be used for detection of information content.This paper designed the group comparison plan, descriptive statistics, regression model, sensitivity testing method to test the general earnings information content in the OTC market. The main conclusions are as follows. In First, the direct earnings information content inspection shows that, the disclosing of direct earnings information△EPS and EPS have information content, and can help investors to earn excess returns. In second, the static residual income RIPS information content examination found that, mixed samples and the2010RIPS have information content, and can bring useful information to investors for investment. In Third, through internal comparison of direct earnings, and external comparison between direct earnings and indirect earnings, I found the information content fo△EPS, RIPS and EPS have different performance. Using multiple regression model and stability analysis, I found the GB(EPS), GB(△EPS) and GB(RIPS) is positive related to CAAR. Therefore, the generalized earnings information of EPS,△EPS and RIPS have information content, can help the investors to make investment decision.The investment strategies of the generalized earnings information are as follows. Firstly, the static earnings information is simple and clear, and they recently fit for the application to individual investors. Secondly, the use of dynamic earnings△EPS information requires certain conditions, that are the main investors have a preliminary understanding on the investment enterprises, and the OTC market and industry are in stable state. Thirdly, the constraints of residual income as unexpected earnings are that, the knowledge structure and quantity and the consciousness of risk of the investors have a certain basis. In short, I recommend institutional investors to use RIPS for considering capital cost and economic profit factor, and to ues EPS and△EPS for mutual confirm and stability test. It will be helpful for the accurate judgment. At the same time, I recommend individual investors to use the EPS or△EPS according to their knowledge structure and computational difficulty. Long term, analysts may be predictive of future development direction.The innovative points of this paper are as follows. Firstly, this paper is the first time to find that static earnings are forms of the UE. The empirical study finds that, EPS, RIPS and dynamic static earnings△EPS have similar information content. And the static earnings information content is slightly better than the dynamic earnings information content. Secondly, this paper is the first time to present the scope and investment strategy of generalized earnings information in the OTC market. Thirdly, this paper puts forward data screening, useing and processing method in the OTC market.Because of the particularity of the OTC market, data manual collection and variable calculation are heavy workloads. Therefore, they only can be treated by the systemic solutions. Forthly, this paper is the first time to use of financial statements and stock price of open data in the OTC market, and to obtain the empirical conclusion. Fifthly, this paper yields the calculation of the RIPS, AR, CAR and other important aspects of the reasonable innovation measurement mode and method.