Market Reaction Of The Information About Assets Impairment

Many enterprises are driven by interest, the management uses its own overvalued assets to pretend as a persistent earning. However, the behavior of enterprises has brought a lot of trouble for the report users, the decisions based on such financial reports are usually not the best, thus resources were not effectively allocated, which will raise an adverse impact on the development of society and economy. Accounting standards and enterprise asset impairment provision aims to make a correct reflection of the real assets value situation and to provide a strong basis for investor’s decision, so the impairment of assets is one of the most important aspects in modern accounting. Application of the provision of assets impairment improves the quality of assets, avoids false profit and fully embodies the principle of conservatism. In2006, the Ministry of Finance issued a new enterprise accounting standards, China had an independent asset impairment accounting standards, and began a nationwide application in2007.Today, the new asset impairment accounting standards has been implemented for7years long, domestic and foreign studies of the application of assets impairment are gradually deepening, Chinese asset impairment accounting standards are gradually standardized, the author thinks that it is necessary to make a systematic summary and further research on this important field of accounting.Today, there is no systematic analysis on assets impairment characteristic, this paper aims to a clear summary of related features of assets impairment of Chinese listing Corporations, in order to improve Chinese asset impairment accounting system. Characteristics of the assets impairment is divided into two levels:the first is industry level, the percentage of assets impairment in some industries will be significantly higher than that of other industries; the second is the item of assets impairment level, the amount of some detail items of assets impairment is greater than other items. It is just like a two-dimensional coordinate clearly describe the characteristics of the assets impairment. In addition, the previous study on asset impairment of assets focused on impairment policy, motivation and information content, while this paper will study the investors’reaction to assets impairment information from a new point of view. This paper has an empirical study of the market reaction to asset impairment in total and details, by calculating the cumulative abnormal return and the multiple regression analysis. We get a conclusion that the assets impairment information does cause a significantly negative cumulative abnormal return.This paper is divided into five parts:the first part is the introduction, it concludes the background of this study and the significance of this research, defining the related concepts involved in this paper, then introduces the research significance and framework, finally summarizes the main points of innovation.The second part is the literature review and related theories, systematically reviews the results of relative studies and the research achievements, discusses the efficient market hypothesis and the signaling theory and systematically summarizes the related knowledge of assets impairment and theoretical derivation, in order to pave the way for the hypothesis and empirical research.The third part is the research design, the main part of the overall empirical study. Firstly summarize the characters of assets impairment of listing Corporation in China by descriptive statistics, then set up hypothesis and regression model, according to the analysis of theory, next define and describe the relevant variables in the model, at last describe the method of sample selection and data procession.The fourth part is the empirical analysis of the market reaction of assets impairment information according to the multiple regression result and stability test of hypothesis1to6.The last part is the conclusion of the study and inspiration, according to the analysis before, the conclusion of this paper puts forward related suggestions, and points out the deficiencies in this research.The conclusion of this paper shows that the information of total assets impairment, allowance for doubtful accounts, inventory reservation and fixed assets depreciation reserves have significant negative cumulative abnormal returns. The opposite is the impairment of construction in progress has a significant positive one. However, provision for impairment of intangible assets has no significant relationship with cumulative abnormal return. It may be caused by the low efficiency of the capital market, problems in the disclosure of asset impairment and accounting personally professional capacity and other factors, so we should improve and develop the capital market of our country, improve the assets impairment information disclosure system and increase the intensity of the accounting personally professional training.