The Short-term Market Reaction Of China's Annual Financial Restatement

In recent years, the phenomenon of financial restatement presents a'spread'situation in China and foreign countries. A series of foreign researches show that financial restatements will not only make serious economical consequences to the listed companies and capital market, but also distort the rationality of the allocation of resources and disturb the development of capital market order, which cause huge economic losses to investors. Many domestic researches have obtained the same result that financial restatements will make serious economical consequences to companies, such as bringing down the share price down, reducing social position of the company. But the domestic research mainly focused on the reaction of the company itself and ignores the impact of the whole industry. Therefore this paper using event study to count the companies'and its industry's excess returns in the window of restatement announcement after referencing the domestic and foreign countries'literature of financial restatement. Through the regression analysis of it we will find the listed company itself suffering value losses from annual report restatement. But due to the competition effect, the expected of the other companies in the same industry increased, which causes the resources redistributed in the whole industry.This paper use data download from WIND and CSMAR database, draws the conclusion after the regression analysis by using SPSS 17.0 software. This paper is divided into six parts:The first chapter is introduction. This part mainly introduces the background and significance of writing. After giving a comprehensive review for the related literature at home and abroad, this paper puts forward to the framework and research methods.The second chapter is the theoretical analysis of this paper which mainly introduces the concept of financial restatements, the cause, the economic consequences and effect mechanism and definitions of the window method and excess yield events.The third chapter mainly introduces the relevant laws and regulations about financial restatement in China and foreign countries. Then introduces the provisions about financial restated of other countries and the development of our financial restatement system respectively. Finally this paper summarized the development feature of Chinese restatement of the financial system.The fourth chapter analyses the factors of industry transfer effect, which include the content of restated report, the features of company and industry characteristics.The fifth chapter is the empirical research of the effect of the industry involving profits and losses changes in the restatement. By establishing research hypotheses, the selection of research samples, the establishment of the model and calculation of the excess return of the company and its industry, this chapter analyses the relationship between the two operations and explains the results by using SPSS17.0 software.The sixth chapter is the conclusion, advices and ahead of future researches of financial restatements.