Market Reaction Research Of Debt Restructuring Profit And Loss

It is a short time since China’s capital market formed, and it is still not mature enough compared with foreign capital markets. In the process of China’s capital market development and improvement, the reliability, accuracy and timeliness of accounting information is an important prerequisite for market development. But in recent years, accounting fraud cases and earnings management cases have attracted much attention in the world and the domestic. Governments and investors increasingly high demands on the quality of accounting information. China’s regulatory authorities require to disclose non-recurring profit and loss since1999and to consider the impact of non-recurring profit and loss when companies issue shares and refinance. This requirement strengthen the quality of accounting information. However, listed companies may still use the debt restructuring to manage earnings in order to obtain huge one-off restructuring income and to avoid losses and delisting.Under the theoretical background of non-recurring profit and loss, this paper selects debt restructuring to analysis the possibility of managing earnings, establish the linear model of unexpected earnings and excess returns and analysis quantitatively the market reaction of debt restructuring with earnings response coefficient. This paper tests within a short window whether the capital market react to debt restructuring profit and loss information in the annual report, what kind reaction is and what difference is between market reaction of debt restructuring and market reaction of recurring profit and loss during capital market. These deepen the understanding of debt restructuring. newly revised accounting criterion. Through empirical study, this paper confirmed a positive correlation between unexpected earnings and excess returns. It instructs that accounting earnings in China contain information. The earnings response coefficient of debt restructuring is positive. It instructs debt restructuring is positively correlated with excess returns. And earnings response coefficient of debt restructuring is higher than that of recurring profit and loss. It shows that investors are not rational yet. And they are not able to distinguish between recurring profit and loss and debt restructuring. There is the possibility of managing earnings with debt restructuring.