Market Reaction Of The Audit Results Announcement Based On The Perspective Of National Governance

The Third Plenary Session of the18th CPC Central Committee pointed out that the general purpose of deepening its all-round reform is to improve and develop socialist with Chinese characteristics, to advance modernization in the national governance system and governance capability. In the national governance system, government audit plays an essential role. In December2003, national audit office issued the first audit results announcement on their official website, laying the foundation of the Audit announcement system of our country. After nearly a decade of development, the audit announcement system is getting better and better. As we can see, the number of announcements increases every year, and the range of announcements gets wider in the meanwhile. So far, the official website of national audit office has totally posted187audit announcements. The development of audit results announcement system, promotes the steady development of China’s democratic political construction, and conforms to the needs of the people. Audit Institutions should make efforts to improve the level of audit information disclosure, and amplify the social impact of their reports.For a long time, China insists to the basic economic system, which stresses public ownership as its main body but allows for the development of all types of ownership. In China’s economic development, state-owned economy shoulders important responsibilities. Therefore, the value of large numbers of state-owned capital on China’s capital market must be secured. From2010, the national audit office has released totally61copies of the audit results announcement about state-owned enterprises, which provides an important platform to supervise state-owned enterprises for the people. Additionally, these audit announcements of state-owned enterprises play a two-way effect in the capital market. It provides a perspective for enterprises to face their management problems by relying on external forces. For people, on the other hand, the announcements of the audit results serve as a significant role to the supervision of the national capital. This paper examines the role audit result announcement plays in the capital market from a new perspective of the market reaction of the audit results announcement. With the results of this paper, it provides an approach about how to improve the government audit and audit results announcement system.Conclusions of this paper expand the theoretical research about audit results announcement. The innovations are as follows:(1) On research ideas, with the study of the market reaction of audit results announcement, this paper explores whether the national audit really plays the role of national governance.(2)On research methods, previous studies rarely used the method of event study. This paper, whereas, adopts this method, and views audit results announcement as a separate event.(3) Considering research content, this paper introduces control samples to compare with the study samples, making the results more comparative and prudence. Moreover, the research classifies those audit announcements by years, so as to examine the yearly differences of market reaction of audit announcement.Under the background of transforming the government functions, this paper studies about the role of audit results announcement in the capital markets and how the audit results announcement play the role better in the future. This paper contains6parts as follows:(1) an introduction of this paper;(2) the literature review;(3) basic theories;(4) empirical analysis and design;(5) explain of empirical results;(6) conclusions and recommendations of this paper.This article researches the market reaction of the announcement of audit results in our country, using the method of event study. The method is commonly used in the study of-market reaction:calculating the abnormal return rate in time window, and then drawing the conclusion about whether the market reacts or not. This paper selects the A-share listed companies related to the announced reports from2010to2013as research samples and locates the date audit results announcement being issued as the research event date. The results of this paper are to answer3questions:(1) whether the audit results announcement makes an impact;(2) whether the disclosure of specific content causes different market reaction; (3) whether the trend of the market reaction of the audit announcement results exacerbates year by year.Findings of the research are as follows:Firstly, according to the large proportion of state-owned enterprises audit results announcements, it indicates that the national audit office lays emphasis on the value keeping of state assets. Secondly, our capital market shows reaction to the announcement of the audit results. Due to kinds of reasons, this reaction is not prominent. Thirdly, different specific information disclosure will lead to different market response. Due to the influence of external macroeconomic environment, the market reaction does not enhance yearly. It implies that with its own limitations and external environmental factors, audit results announcement system hasn’t fully played its expected function yet.With a series of studies, it is found that there are still some improvements for China’s audit results announcement system. In the end of the article, the paper gives some improvement proposals:Improving the timeliness of audit results announcement; Strengthening the pertinence and comprehensibility of information of our audit results announcement; Using the results application mechanism to strengthen the implementation of audit results.