The Effects Of Financial Restatements On Stock Prices Of Chinese Listed Companies

Recently, more and more listed companies have announced financial restatements. Financial restatement phenomenon has become more and more serious, even more than20%a year. The purpose of this paper is to study the impact of financial restatements on stock prices of Chinese listed companies, from2009to2013. The research sample is about stocks on SSE, SZSE, SMEs Board, and GEM and financial restatements comes from JUCHAO internet. The number of the sample is1239. Using multivariate linear regression model to research the short-term response in the market to the financial announcements that contains error information, the empirical results show that the real unexpected operating performance is positively related to the stock price on original announcement day. Stock price is affected by the false financial data, and the relationship between them is negative. Increasing financial data has a positive effect on stock price. However lowering financial restatement data has a negative effect on the stock price. The longer the distance between financial restatements and original announcements is, the larger the influence on stock price of false financial information is, and it is negative. At the same time, study the influence of financial restatements on stock price for a long time return and different types of financial restatements. The empirical study shows that the effect of correction announcements on stock prices is negative. At the same time the supplementary correction announcements have a negative impaction on stock prices. Financial restatements involving core profit have a negative impact on stock prices; Tax related issues are also negative with stock prices. The influence of balance sheet items, shareholders on stock price is uncertain. Increasing the company’s operating performance has a positive impact on stock price, but reducing has the opposite effect. The frequency of financial restatement is negative with stock prices. Based on the empirical analysis, Suggestions should be proposed. The listed companies should publish real information. Regulators should further standardize the system of financial restatements. Investors should improve their knowledge about market.