Time-series Change In The Importance Of Financial Statement Announcement: Evidence From China

For finding whether investors use the public accounting information to make a decision,many of the prior literatures just test the reaction of investors on the concrete accounting data.But they ignore one of the fundamental questions,that is,how important are the public accounting information for investors to complete their annual transactions and what is the time-series trend of this importance? This thesis focuses on the fundamental question and is to find the importance of financial statement announcement and its time-series tendency.Although many literatures have concerned on the decision usefulness of financial statement announcement,there are a few of flaws in their arguments.First,they just pay attention to the information of earnings and ignore the information of other parts of the financial statement,such as, footnote of financial reports,social responsibility report,receivables,total assets,and so on. Second,they use the cumulative abnormal return(CAR) to measure the reaction of investors during the period of announcement.This measurement doesn't represent the total information which investors use to complete the annual transactions.Because these researches just focus on the information of earnings over the period of financial statement announcement,they don't show the importance of the public accounting information over the whole calendar year.Ball and Shivakumar(2008) used the quarterly earnings announcement window returns regressing on the annual calendar year return to find whether the earnings announcement provide more new information to investors.This thesis also uses the model in the research of Ball and Shivakumar in 2008.1 use the abnormal return over the financial statement announcement window as the proxy of the information contained in financial statement announcement.I also use the annual abnormal return as the proxy of the information that investors use to complete the annual transactions .I find that the Adjusted R squares are significantly higher than 10%from 2002 to 2006,and then fall below 10%in 2007 and 2008.The Adjusted R square is about 2%to 4%at lowest in 2008.For finding what affect the information of financial statement announcement,we provide three aspects which may influence the decision usefulness of financial statement announcement.First, the equity structure may lower Adj-R~2,that is,the more institutional investors in the market,the lower decision usefulness of financial statement announcement.Second,if accounting information system pays more attention to relevance of outputs,the reliability of system may become weak. Third,because of a large number of other information systems in the market,these systems may convey more timely and relevant information to investors than accounting.We study relationship between the residual and the above three factors from 2003 to 2008 and find that the percentage of fund holdings and the number of analysts are significantly positive correlative with the unexplained ,and the proportion of discretionary accruals in the total accruals isn't correlative with the residual.The result may illustrate that the real cause is the rapid development of the market,not the change in the accounting standard.