Market Reaction Research On Accounting Estimates Of Listed Company

More and more scholars focus on the change in accounting estimates as a way ofaffecting profit change, thus they do a series of related research. Accounting to theprior study, the companies that change its accounting estimate always have specificreasons. And these reasons may cause the stock price wave. Some authors prove thatthe companies that change its accounting estimate will cause a negative value of CAR.But other people use different time windows, and get an opposite result. It is differentthat the reaction of investors to the stock price in accounting estimate change. Theinvestors judge from the fact out of the change finally.This paper uses the2008-2010of listed companies in Shanghai A-shares stockmarket incorporated in the data for the sample, combined with the background ofChina in2006under the new accounting standards. And it researches on the issue ofmarket response to changes in accounting estimates, starting from basic performanceof the company that changes its accounting estimate.In the theory section, the paper gives the efficient market theory, contract theory,fractal market, for the studies the theory of mind. Then according to the basicstatistical analysis, after the promulgation of new accounting standards, the number ofcompanies that change in accounting estimates goes down to some extent. Meanwhilethe author found that the change in accounting estimate results from accountsreceivable for bad debts, depreciation, etc. The change affects companies with moreprofit more because of the depreciation of fixed assets. From the change of thecorporate type, manufacturing industry takes up more. In the case of loss, companiesoften take advantage of changes in accounting estimates for large profit adjustment,additional adjustment or reduction adjustment shows a clear motive. It is notsustainable that companies make profits with changing profits of this year or next.In empirical studies, market approach and market adjustment method areresearched for mutual authentication. After controlling the effect of related variables,it’s found that company with changes in accounting estimate and the company with nochanges are systematically different. Also, the company with changes in accountingestimate exists obvious internal differences. Different types of change in accountingestimate, the impact on stock prices are different, in the short and long termobservation of the market, market reaction oriented differently. I will fall into three types of changes in accounting estimates for specific tests.As proved it is, the market reaction of the company with short-termed changes inaccounting estimate is negative. But as time goes on, market makes appropriateresponse based on causes of change in accounting estimate, the long-termed marketreaction is positive. In addition to the research on the project of changes in accountingestimates, it is found that the company reduces receivable profits for current period,so as to change in accounting estimate, thus the earning rate in the long window ispositive.