The Research On The Relationship Between The Financial Restatement And Corporate Financing

With the development of economic globalization, capital market gradually grows up, and the investors and other stakeholders of corporate put forward greater requests of high quality accounting information. It is well known that high quality accounting information can not only reflect the financial position and operating results of an enterprise, but also provide investors with more confidence to guarantee their economic benefits. The financial statements, as best represents of the enterprise operating conditions, are windows for investors to know the enterprise. In reality, however, more and more financial restatements happened for various reasons, which not only hindered the orderly development of capital market, but also made people doubt the enterprise’s financial reliability. Now, academic and practice circle pay attention to the field of financial restatements.At present, the domestic and foreign scholars studied the phenomenon of financial restatement in many aspects, and mainly focused on the concept of financial restatement, the causes of financial restatement, economic consequences caused by financial restatement and so on. Financial restatement is a behavior that listed companies correct errors existing in the financial sheets or supplement incomplete disclosure of financial report information, which usually disclosed in the form of correction or supplement announcement, sometimes disclosed with the annual report together. The intention of restatement is to ensure the authenticity and reliability of the published financial statements. On the contrary, restatement shook the confidence of investors, and made them doubt the accuracy of the financial report information, which caused a series of adverse consequences. In recent years, financial restatements happened frequently in our country, not only reflected the drop in the quality of information disclosure, but also infringed the economic interests of stakeholders, increased the financial risk of the enterprise, affected the enterprise financing way, and increased the enterprise’s financing costs at the same time. So this article mainly reviewed domestic and foreign literatures from two aspects, economic consequences caused by the financial restatements as well as the influence factors of corporate financing. Financial restatements, as a kind of corrective actions, not only reduce the confidence of investors, cause strong reactions, but also affect the reputation of the company, which may lead to management changes. If financial restatement was intentional, or broke the law, and brought huge losses to the interests of the investors, then the company may get involved in lawsuits. In addition, the financial restatements reduce the report disclosure quality, and increase the uncertainty of accounting information, which lead to increased cost of financing. As the reflection of enterprises operating results, financial report is the main basis on which investors make decisions, so the disclosure quality will directly affect the investment in enterprises. After reviewed the domestic and foreign literature, we found that the current literature about how financial restatements affect corporate financing is not much, so this article will study the impact of financial restatement to the enterprise financing, in order to standardize the disclosure about financial statements of enterprises, and provide suggestions for rational utilization of financing.First of all, on the basis of literature review, this paper expounded theories about restatement of finance, corporate finance and their relationships, which mainly included the concept of financial restatement, motivation and economic consequences, the concept of corporate finance and its influencing factors. And besides, this paper expounded theoretical support of the relationship between financial restatement and corporate finance, they are theories about decision-making serviceability and asymmetric information theory. And then, based on the analysis that financial restatements influence the corporate finance and financing cost, this article put forward the following hypothesis:the first is a rival hypothesis, namely, after the financial restatement, companies are more inclined to creditor’s rights financing or equity financing; and the second is that after the financial restatement, whether the cost of equity financing and debt financing will be increased. This article selected the two main board listed companies as samples, from2000to2012, established the model, and used descriptive statistics and multivariate regression method to analyze the impact on financing and financing cost caused by financial restatements. The results show that after the financial restatement, compared with equity financing, enterprises tended to creditor’s rights financing; And the cost of the equity financing and debt financing were promoted.In other words, the financial restatement report not only increased the degree of asymmetry of accounting information, but also increased the doubts of the investor to the enterprise real financial situation and the difficulty of external financing. Because risk prevention method in banks is diverse, so after the restatement, creditor’s rights financing will be easier than equity financing. Then, according to a certain standard, this paper divided restatement into core restatement and non-core restatement to make robustness tests for previous assumptions. The test results agreed with the above. This suggested that the financial restatement produced adverse effects on corporate finance. At the end of this paper, we summarized the research and pointed out the deficiency existing in this research and the future research direction. At last, we put forward some suggestions to standardize financial restatement phenomenon and select reasonable financing way, such as perfect the accounting information disclosure, standardize the financial restatement system, rich the enterprise financing ways and so on.