Study On The Effects Of Earnings Disclosures Formats On Investors’ Equity Valuation

Now, the earnings information is no longer simply based on chinese accountingstandards(CAS) disclosure, many companies choose pro forma earnings disclosure formats,so the impact of earnings disclosure formats on investors’ estate of stock price isintroduced through a experiment under the current situation in china.The experiment isbased on the theory of information disclosure and judgment and decision making.At last,some guidance are also provided for the investment of the investors.First of all, the relevant literature of the pro forma earnings, financial informationdisclosure, investor judgment and decision are reviewed.Research about the effect ofinformation disclosure on investors’ judgment are also presented.Secondly, according tothe theory of information disclosure and judgment and decision making, two relevantassumptions are put forward.On the basis of the hypothesis, a2×2experiment is designedto study the impact of earnings disclosure formats on investors’ estate of stock price. Theexperiment process includes selection of subjects and case, assignment of experimentaltasks.At last, the influence on investors caused by the disclosure formats are analyzed withexperimental information.And, the two hypotheses are tested with SPSS.The results indicate that nonprofessional investors who received an earningsannouncement that contained both pro forma and CAS disclosure assessed a higher stockprice than did nonprofessionals who received an announcement containing only CASdisclosures, and professional investors’ estate of stock price are not affected by the proforma disclosures.Because of lack of knowledge, nonprofessional investors’estate of stockprice are influenced by the pro forma earnings information, and then assess a higher stockprice.But the impact of earnings disclosure formats on professional investors’ estate ofstock price are eliminated by the profound professional knowledge,so the stock price is nodifference in two disclosures formats by professional investors.Therefore the earnings information disclosure system should be improved by the stateregulators or policy according to the characteristics of China enterprises, and then a healthenvironment for investors should be established. At the same time, an individual cognitive psychology is influenced by the earnings disclosure formats,so earnings informations arethe key financial decisions and should be focused on.