Research On Time Selection Of Financial Restatement’s Announcement

In recent years，the phenomenon that listed companies due to the previouslyfinancial report released false or misleading information and lead to financialrestatements reported are more and more serious. Financial restatement refers to that alisted companies re-expressed in the financial report of the previous year by voluntarilyand under the supervision of the regulatory authorities or auditors of financialinformation. The financial restatement is actually modify the correct or added to theinformation of the previous financial reports. Due to the system of financialrestatements is not perfect, in order to establish or maintain a good image in stockmarket, the managements of listed company should disclose those information bychanging the strategy. On the other hand, because of the limited cognitive ability, wheninvestors in face of the numerous of information every day, their awareness ofinformation reduced. Also, limited attention of investors will show in the capitalmarkets. what’s more, capital markets will produce some significant regulate. Actuallysay, the intention of financial restatement is to protect investors by providing moreaccurate information. However, in the case of information asymmetry and limitedattention of investors, the management may through the financial restatement to achievethe purpose of self-interest. The financial restatement that the listed companiesdisclosed is very important information for investors. So this paper main study thatwhen the listed companies disclosed their financial restatement, whether the marketexistence of week preferences and month preferences? Would the listed companieschoose when to disclose the relative financial restatement because of limited attention ofinvestors? Because of the limited attention of investors, the listed companies maydisclose their good financial restatement news when investors have a very high concern;and the companies may disclose their bad financial restatement news when investorshave a very low concern? For all of the financial restatement disclosed in the capitalmarket, whether the investors have a right and sufficient immediate reaction?Limited attention is a branch of behavioral finance. In their point, investors do nothave much energy and ability to fully deal with all the available information. So they tend to consider that part of the information that caused their attention. And thephenomenon leads to over-react or under reaction in market. In this paper, we collected491piece of financial restatement during2005to2010. Also,we describe the goodnews and bad news and time lag data by chart. What’s more, through the establishmentof the econometric model, we established multivariate linear regression model toanalysis the relationship between the timing of financial restatement and good or badnews and company size and so on. The innovation of this paper that to combine thelimited attention of investors with the timing of listed companies to disclose theirfinancial restatement to explain the heterogeneity in the capital markets.The empirical results of this paper found that there is certain timing choosing forlisted companies in disclosing financial restatement in China. Further empirical resultsshow that capital market present some week preference and month preference. Alsowhen investors have high concern in working day, listed companies will choose todisclose good news on weekdays; when investors have dispersed their attention inweekend, the listed companies will choose to disclose their bad news in weekend. Inaddition, the company choose to disclose the good news at the beginning of1to4month.And they choose to disclose the bad news after April (except April). Further findingsshow that when investors have high attention in the prior period, they have a full andright reaction to the massages; but when investors have low attention in the prior period,their response to the financial restatement is under-reaction and fully lagged response.