The Market Reaction To The Governmental Subsidy Of Listed Companies In Western China

The earning management through extraordinary profit and loss has drawn a board attention from both the scholars and the society. Government subsidy is one of the important items of the extraordinary profit and loss, plays an important role in the economic system of our country. In recent years, along with the deep implementation of the "Western Development" strategy, it is meaningful to study the motive and the act of western local governments’subsidies to the listed companies, and the influences to the market. This paper selects the listed companies located in western China, which involved in the "Western Development" strategy from Shanghai security exchange as sample.This paper chooses the sample during the2007to2010after the new accounting standards issued. These make the research results more targeted and timely. This thesis adopts empirical research to study the market reactions and the information contents to the government subsidy, this thesis in order to prove that the local governments’ participated in the listed companies’earning management, and to analyze the approach and motivation of the participation, and the degree of the influence.The research found that unexpected earnings have positive correlation with the excess returns. The ERC of the governmental subsidy’unexpected earnings is larger than the ERC of other unexpected earnings. The research indicates that the governmental subsidy has higher information contents. The market is more likely changing its forecast on listed companies. While the government subsidy’s characteristics of disposable and sporadic make itself not have predictive value. This affects the information users’ evaluation on the company’value and the operating results, and misleading them making the wrong judgment, thereby affecting the efficiency of the stock marketing’ price setting. Western market can’t effectively identify the earnings management in the listed companies from the perspective of the government subsidies. The western market is functional fixation in our country.This thesis has1chart,8tables and49references.