Research On Market Reaction Of Financial Restatement In Our Country’s Listed Companies

In recent years, the restatement on annual report frequently arose in our county’sstock market. This phenomenon usually indicates that there are errors or omissionsin the information previously published, and thus the investors may doubt theinformation quality even the restating firm itself, which may affect the company’svalue in the capital market.Using a sample of359supplement and correction announcements to annual reportsof Shanghai A-share and Shenzhen board the A-share listed companies between2009and2011, this paper conducts an empirical research on the stock market reactionfrom annual reports restatement of the listed companies. The aim is to discuss aboutthe stock-return behavior before and after the issuance of the restatement in a shortterm of our country’s special economic background, and how various types ofrestatements contribute to the abnormal returns.Firstly, this paper summarizes the financial restatement system and related literatures,at home and abroad, and proposes the assumption of this paper based on thefinancial restatement related theories. Secondly, this paper designs this research, andfilters out the experimental samples. Then using event study methodology, estimatedthe accumulative abnormal returns that contributes by the restatement of companiesin the shares market, basis the single-sample mean t-test and multiple regressionanalysis the combination of empirical investigation. The results show that the wholeannual reports of the listed causes some negative impact on firms’ value, butdifferent kinds of restatements result in diverse stock market reactions that may berelated with the investors’ different focuses or judgments on restatements. In thesesamples, relative to supplement announcements, correction announcements andsupplement and correction announcements cause obvious negative impact.Meanwhile, the market reaction of announcements related to the core accountingindicators and announcement initiated by external agencies is obvious negative,while the restatement announcement released together with periodic reports ofpositive impact on the market. Finally, combined with the empirical results, thispaper put forwards some proposals.