Research On Financial Restatements’ Motivation And Economic Consequences Of Chinese Listed Manufacturing Companies

Financial report is not only an important media to disclose information for listing corporation, but also an important way for investors to understand an enterprise’s financial position, operating results and cash flow. The restatement of financial statements refers to the representation of the information which has been disclosed in the financial statement at the end of the fiscal year. Financial restatement is the negation of historical financial report, so the issues of financial restatements usually lead to negative impacts on the enterprise, such as the losses of market values, the rise of the capital cost and the turnover of senior executives. In recent years, financial restatements have become a universal phenomenon in the world capital market. What’s more, this phenomenon has seriously affected the reliability of financial reporting and shaken investors’ confidence. Therefore, it has great theoretical and practical significance to study the financial restatement problems deeply.Financing demand is one of the most important motivations for listing Corporation to restate financial reports. Based on the analysis of the present situation of our country manufacturing industry listed companies’ financial restatements, this paper conduct the empirical test for the linkage relations of the financing demand, financial report restatement and debt financing. This paper takes the manufacturing companies which issued financial restatement temporary announcement from2008to2013in China Stock Market as research object and select the companies that list on the same exchange, have similar size with the restated companied and haven’t restated the financial reports in the six years as the matching samples to study the linkage relations of the financing demand, financial report restatement and debt financing.To confirm that whether the financing needs would significantly increase the possibility of financial restatements, this paper selects index FN and ncf as proxies for financing needs. The paper finds that the financing demands of restated companies are greater than that of the matching samples. What’s more, the paper also finds that the financing need is significantly positively related with restatements of financial reports by conduct logistic regression. So we can come to this conclusion:the companies which have financing demands are more likely to restate the financial reports.At the same time, this paper studies the financial restatement behavior’s impact on debt financing. This article selects "receipts from loan" as the proxy variable of debt financing scale and "restatement" as explanatory variable to study the effect of financial restatement on debt financing scale. The paper finds that the debt financing scales of restated companies are less than that of the matching samples, but the result is not significant. By conducting linear regression, the paper finds that the financial restatement is significantly negatively related with debt financing scale.From the above analysis, it is obvious that financial demand is one of the most important factors for the listed companies to restate the financial reports. But the creditors will adjust credit granting to the enterprises according to financial restatements information. The results show that creditors have played an important role in the supervision of listed companies. This study could not only help to deepen the understanding of the linkage relationship of financing demands, financial restatement and financing needs, but also provide new evidences for whether the creditors play a supervisory role.