Study On The Response Of Financial Restatements Of Listed Companies’ Annual Statements

In recent years, financial restatement has occurred in the global capital market,andfrequently became the major concerns between the scholars. Financial restatement is anenterprise of the previous annual financial report during the re-presentation and disclosure, to acertain extent, that previously announced financial information of low quality and poor reliability.The prevailing capital market financial restatement behavior of the market and investors in listedcompanies ’ trust and confidence in the continued degradation and loss. A large number offinancial restatements would be misleading to investors in the capital market and the company’sfinancial position, operating results and cash flow to make the right judgments, affectinginvestment decisions, market resources is not conducive to efficient configuration. Listedcompany’s financial restatement behavior will seriously damage investor wealth, as former SECChairman Levitt once said:" the destruction of numerous financial restatements wealth ofinvestors." Financial report financial information carrier, financial restatements to correctaccounting errors as a mechanism, but was listed as props favorable operating profit accounting,the financial restatement theoretical and practical aspects of the problem are worthy of furtherstudy.By studying a sample of financial restatement from2007to2012with event study methodand multiple regression,this paper analysis the market response and influencing factors of thefinancial restatement. The results sayed that companies turned to be more inclining to choose theway disclose aggregate restated reported of the type of financial restatement will result in anegative market reaction. Annual results excluding the separation of nature restatement factorssignificantly negative market response, strong evidence in our financial restatement will alsoresult in a negative market reaction. Multiple regression analysis showed that, compared torestated in terms of passive, active restatement is an outward manifestation of honestmanagement, you can get the market’s forgiveness, financial restatements offset the negativeimpact of bad news; financial restatements retroactively adjusted net profit margin greater history,there will be more severe negative market reaction; poor profitability, companies with higherfinancial risk, the investor’s trust and confidence in the financial restatement decreased and loss,resulting in a negative react more strongly to the market; has a higher debt ratio of the company,subject to creditors’ contractual constraints will be more apparent, resulting in a strongermanagement incentives to manage earnings, its restated investor behavior will further reduce thequality of financial information and their confidence.