Operating Performance Persistence Of Listed Companies

Operating performance which is described by financial data is an important index to characterize the company’s operating status. The stability and continuity of operating performance is very important to the company value evaluation. However, the mutation of Chinese listed companies’operating performance hanppens usually. The "negative news" of operating performance persistence of listed companies can be heard without end. Maijie Technology, which is listed in May 2011, is an example. In one month after listing there appeared the down situation in operating income and net profit. The operating income of the first half year fell 6.82%, and the net profit attributable to ordinary shareholders of the first half year fell 8.48%. Its "changing fast" performance leads Maijie Technology shares plummeted. Many investors suffer heavy losses. Similar examples are not enumerated. Then, there come the questions. Does the companies whose performance change fast whitewash statements before IPO order to meet the listing requirements? Can the early performance of good corporate performance in the subsequent period maintain long-term? Can the long-term performance stability of the "good companies" convert to its share price performance, which is also called stock excess return"? Answers to these questions are of great importance to IPO policy, regulators and investors.We based on the paired samples T test and event study method. We select the companies which are listed from 2009 to 2010 as study samples, and select the time from 2 years to 2 years after as the study period. We compare the operating performance before and after IPO. Through the classification test we analyze the operating performance in different groups. Based on the empirical research of this paper, we analyze the relationship between the performance persistence of the listed companies and investment performance of he listed companies. We select the "good companies" which have good performance persistence and "bad companies" which have bad performance persistence according to the model of the empirical results. Then, we calculate the rate of return on investment from the year 2011 to the year 2013 of the "good companies" portfolio and the "bad companies" portfolio. We compare the rate of return on investment of the "good companies" portfolio with the "bad companies" portfolio. We also compare the rate of return of the two portfolios with the market which is the Shanghai and Shenzhen 300 index to verify whether it can obtain excess returns.Based on the empirical analysis in this paper there are three main conclusions.1. The persistence of performance of China’s listed companies is not good.2. The performance persistence exist difference if we divide the sample companies into different groups. Public sector has obvious influence on performance persistence. Companies which have a high degree of ownership concentration, or companies which issue less new shares, have better operating performance persistence than other types of companies. Companies which have high management ownership have better performance persistence.3. "Good companies" portfolio which has better performance persistence can achieve excess return. Finally, the paper puts forward some suggestions. For operators of listed companies, it is important to establish a link between "good company" and "good stock" to form a good business philosophy and promote the healthy operation. For regulators, it is important to strengthen the information disclosure and the investors’ education. For investors, it is important to establish the "investment value" concept, and behave rationally in investment.