Media Supervision, Financial Fraud And Corporate Governance

Corporate governance which caused by the separation of ownership and managerial authority, is divided into internal governance and external governance. At early stage this problem focused on analysis internal governance, mainly discussed the relationship between the inter factors such as board of directors, management and shareholders. Recently years, as the expulsion of economic crisis, An Ran and Shi Tong faced bankruptcy because of the finance problem, so the external corporate governance has been paid higher attention. In fact, as corporate governance is not only the problem of internal governance issues, but also the combination of internal and external. With the more and more developed information, media as the important information transportation, our country is in the period of economic transition, the formal legal system cannot be completed by days. The media as law system has become the investor legal protection of natural alternative. From Yin Guang Sha financial fraud, various fund shady event in2001, to San Lu melamine milk powder incident in2008, Wu Liang Ye on suspicion of illegal operation of related party transactions and events in2010, were all first disclosed in the public eye by media, eventually aroused much attention and executive intervention and handled the event. Media, as an important external governance mechanism, has a profound impact on capital market.This paper mainly based on the previous study and theoretical analysis, taking the Zi Xin Pharmaceutical as the research object,using the empirical analysis as the theoretical supplement, using event study method,taking the corporation burst negative reported made by the media as the research event,and with cumulate abnormal return to measure the market reaction of investors valuation changes to make contrast the difference between negative reports the day before and after the cumulative abnormal return of media.In this article, author first instruct links of finance fraud and corporate governance, media supervision and corporate, then made a detailed introduction to the market reaction caused by media supervision. In case make objectively repartition of analysis of Zi Xin Pharmaceutical, and make analysis of the finance fraud, pointed out the lack of internal and external corporate environment, then further use event study method to analyze the negative influence caused by Zi Xin Pharmaceutical manufacturing false and the stock price on the company, in order to know whether the negative report had caused market reaction to the Zi Xin Pharmactical? What’s the difference of the market reaction to the same industry? In the end, the results show that, the negative report can affect investor decision-making in a certain extent. And media negative report can affect enterprise negative abnormal stock returns, also relative to the same company, the negative reports of company caused by the negative abnormal stock returns is more obvious.In this paper, through the combination of theoretical research and case analysis of Zi Xin pharmaceutical company financial fraud in the event of governance mechanism,, and analysis that market will give the correct pricing about the quality of corporate governance mechanism by using event study method after media supervision. Compared with other enterprise in the same industry, media negative reports showed negative influence on company’s share price, in the premise of the continuous development in the current securities market, hoping the corporate governance of the listing Corporation can be more perfect, also advocated the media on the supervision of the enterprise, and effective protection of the stock market operation.