The Influences Of Institutional Investors Holdings On Market Reaction Of Listed Companies’ Earnings Surprise

Earnings information disclosure is the bridge between investors and listed companies. Security analysts industry has developed rapidly in China, the information of analysts’ earning forecast has more reference value for investors. They begin to more and more attention the deviation of the announced surplus and forecast surplus. The abnormal market reaction by the deviation is more and more obvious. The influence of earning surprise in the capital market is rising. Institutional investors are one class of the special subjects in the investor group. And they have been the integral part in the capital market after more than ten years of development. But it hasn’t been clear that the institutional investors can play the supervision function and make the capital market in China develop sustainable and healthy.Starting from the angle of institutional investor holdings, the paper explores the influences on market reaction of listed companies’ earnings surprise combining theory and empirical. First, the normative approach is used for analyzing the study of the capital market, the institutional investors and earnings information. Besides, theoretical exploration is used for the dissension about the influences on the institutional investor. And then, founded on the event study method, the article takes the sample of 1012 data totally selected from manufacturing listed company of China’s A share market between 2009 and 2013,builds multiple regression model, and inspects the influences on market reaction of listed companies’ earnings surprise when institutional investors holds the listed companies’ stocks.After the empirical research, the paper comes to a conclusion as follows:earnings surprise can make the Share price volatility of the manufacturing listed companies, and when the institutional investors hold the companies’stock, the volatility may be even more serious. Besides, the abnormal phenomenon happens in advance. At the same time, this article reveals short-term speculation, insider trading and other problems in the market in China. For the problems, some advices have been put forward from the aspects of institutional investors, information disclosure system, and the development of securities analysts. The paper reveals what the role the institutional investors play in the market when the company makes earnings surprise which stocks they hold. And it takes references for standard industry development of institutional investors and capital market.