Research On The Market Response Of Financial Restatements Of Listed Companies

Financial statements are the most important Carriers of accounting information disclosure for listed companies, which is also the main channel for users to understand the financial status of listed companies, including financial condition, operating results and cash flow. However, in recent years, financial restatements phenomenon of listed companies in China dramatically emerged, which caused domestic scholars’ widespread attention. The financial restatements indicate that the financial statements that listed companies disclosed have some kind of omission or mistake, which will mislead investors and will also have side effect on reasonable resources allocation and efficient operation of the capital market. Therefore, to study the information disclosure quality of financial restatements of Chinese listed companies has strong theoretical significance and practical value.This paper conduct research through normative analysis and statistical analysis.Based on the thorough statistical analysis of the financial restatements of listed companies, we later on analyze the impact caused by financial restatement on stock price by using the method of event study, and thus provide some advices for the prevention and control of financial restatements.Through the research, this paper draws the following main conclusions: Restatements for listed companies in the Shanghai Stock Exchange are more and more serious. Correction announcements and mistakes caused by staff of the financial statements explain the largest proportion. The financial restatements announcement content involves the core accounting indicators cover the largest proportion. Through further investigation, I found that restatements relating to financial statements always comprise profits and many are related to profits reduction.By ACAR T test we found that, restatements due to the mistakes caused by staff or including contents involve core accounting indexes and uncertain risks have significant negative average cumulative excess returns. Furthermore, multiple regression on the market reactions of financial restatements showed that, inspections involve core accounting profits will also lead to negative average cumulative excess returns, at the same time,. Financial restatements involve core accounting index or uncertain risk show a significant negative market reaction in different window period.