Study On The Information Content Of Infrequent Earnings Of Listed Companies

The healthy development of securities markets cannot leave the government’s regulation, securities regulators formulated a series of policy measures to ensure the effective operation of the securities market, the China securities regulatory commission promulgated a large number of rules in IPO, SEO and delisted to protect the interests of the investors. One of the cores of Securities supervision is the accounting information disclosure of public company, and among them the supervision for accounting earnings is the most important. The China securities regulatory commission put forward the concept of infrequent earnings and make provisions for the disclosure of infrequent earnings in1999, and then in2001、2004、2007and2008, China securities regulatory commission amended the provisions to suppress the listed company to manipulate profits to mislead the investors’ decision-making. It reflects that the China securities regulatory commission pays great attention to the disclosure of extraordinary items.The listed company’s surplus consists of frequent earnings and infrequent earnings, the significance of these two types of surplus is different to enterprise, recurring profit and loss is the company’s core income, it has predictive value to enterprise’s development and continuous growth. Infrequent earnings are temporary, do not have predictive value to the sustainable development of enterprises. Investors should distinguish two different types of surplus correctly to make the right investment decisions. At the same time, China has adopted mandatory disclosure policy for the extraordinary items, but IASB、FASB and some other Western developed countries, the disclosure policy of infrequent earnings experienced a process from supporting separate disclosure to limitations, In this context, basis on the review of domestic and foreign infrequent earnings literature, starting from the theoretical of infrequent earnings, noting that the disclosure policy is adapt to the development of China’s securities market situation, the disclosure of infrequent earnings can improve investors’ decision. In the empirical part, I use the information content of the infrequent earnings as a starting point, research the information continent of infrequent earnings that related with the stock price with price model, check if the investors make a distinction between the ordinary items and extraordinary items when they evaluate the price of stocks, that is, whether investors recognize that different earnings means different to the sustainable development of enterprises, and whether investors distinguish between a summary of the corporate reporting income and its persistent income, and thus a better understanding of the non-recurring profit and loss information disclosure policy.Empirical research on infrequent earnings reflected that investors has realized the difference between ordinary items and extraordinary items, there were more information in ordinary items then extraordinary items, that is, the correlation between ordinary items and stock price is higher than extraordinary items, and there were more related information about stock price in persistent surplus than in consolidate earnings. Finally, based on the previous discourse and empirical results, we give some suggestion from the aspect of disclosure policy of extraordinary items, securities regulation and investor protection.