The Market Response To Extraordinary Items Of Listed Companies

It is the government's regulation that plays an important role during China's economic transition and the construction of emerging capital market. Today, in terms of the process of IPO, SEO, ST and delisted, governors have established a large number of measures to ensure that the policies can be implemented well. The core requirement is the compulsive regulation on the information of the accounting earnings. Since 1999, CSRC began to take measures to restrain the listed companies'motivation to control the profit by regulating the disclosure of extraordinary items in the accounting profit, which enhanced the quality of the information about the accounting earning.Obviously, the profitability and growth reflect by traordinary and extraordinary items respectively are different. The investors should distinguish them which have different sustainability, so that the profitability can be judged properly. Based on the facts referred above, this paper began with the theoretical background and the policy evolution, then analyze the conditions, motivations and methods of the listed companies in taking use of the extraordinary items to influence the capital market. In the empirical part, for the reaction of the market which is influenced by the extraordinary items, we tested the different reaction of the market to the traordinary and extraordinary items respectively through return model and level model, that is, fixes them different price. This thesis is intent to test if recurring earnings and non-recurring earnings can forecast the composition of the accounting earning in different ways from the aspects of persistency and value-relevance. Will the proportion that extraordinary items take in retained profit influence the stock price? This is also our research contents. Through the research, we hope to deepen the understanding of the important realistic meaning of the regulating and revealing about the extraordinary items.After the empirical research, we find that the market can set different prices to traordinary and extraordinary items, that is set the former a high price and the latter a low price. Also, the proportion that extraordinary items take in retained profit can be able to influence the stock price, the more extraordinary items contribute to retained profits, the less of their impact to the company's value. At last, we put forward some suggestions from the aspects of accounting treatment mode and regulatory.