Research On Reputation Repair After A Serious Restatement

Recently,the proportion of the financial problem is increasing, which has aroused the attention of the society. The consequences of the financial restatements are not predictable and predictable, the economic loss to investors and other stakeholders can not be measured and compensate, the capital market will be affected the most and rapidly. With the accelerated process of global integration, the future competition among the enterprises will be reflected in the company’s reputation, the reputation will be included in more and more enterprise’s core values. Many developed countries such as the United States and other developed countries are increasingly focus on corporate reputation and give full play to the role of the company’s reputation. Listed company occurred financial restatements will not only cause a substantial decline in the market value of the company, bring huge economic losses to the company, more serious consequences is lead to the crisis of capital providers and other stakeholders’s confidence for the company’s accounting information and damage the company’s good reputation, shaken investors confidence for the corporation’s ability and integrity. Because of the company’s financial behavior damage the interests of stakeholders’s confidence, the company’s reputation has been damaged, and then reduce the investment of investors,which will bring huge economic losses. Therefore, after financial restatements many companies begin to pay attention to credit reconstruction gradually and to restore stakeholder confidence to the company, to ensure company could normal operation in a fastest speed. Today, compared to foreign capital markets, China’s capital market is still underdeveloped, there are still defects in the regulatory system, The full play of the reputation of the company is not sufficient.In this paper, we analyze the rebuilding reputation of the management after the financial restatement in theoretical analysis and empirical test. This paper mainly adopts event study method to study, through descriptive statistics and empirical analysis to verified the research, in this paper we studies wether the listed company will take rebuilding reputation behavior after financial restatements and whether the rebuilding reputation behavior will get the market reaction, whether rebuilding reputation restore investor’s confidence.Through collecting data and empirical analysis, this paper first estimates the type of corporate reputation, and then select the sample of financial firms to assess these forecasts. We find after financial restatement, the company will take more to rebuild the reputation of behavior, reputation reconstruction bulletin number and frequency increased significantly. And the range of reputation acts involving more extensive reconstruction, including the replacement of directors and executives, the release of dividend distribution announcement, increase the repurchase shares and the purchase of funds and other acts. After the financial restatement, companies will take activities to rebuild the reputation of the company.In the short term, this kind of reputation will be affected by the impact of the market and the changes of the stock returns. From a long-term perspective, the market does not appear to have a full positive abnormal return, but there is a weak reaction in the presence of individual. The company’s reputation for rebuilding behavior of investors and improve the reliability of financial reporting is closely related, this paper prove that rebuilding reputation behavior will improve the transparency and credibility of financial report,and also improve the confidence of investors on the reliability of financial statements, our paper intends to through the test of earnings response coefficient to observe the change in investor confidence in financial reporting credibility.Most of the existing literature in China research financial restatement behavior and reputation rebuilding behavior independent and not binding on the two studies.The innovation of this paper is reflected in the combination of the two kinds of behavior, which is the combination of financial re and reputation of the listing corporation, research the reputation behavior after financial restatement, The paper takes the Chinese market as the background, and has a strong theoretical significance and practical significance. This paper enriches literature related to the study of financial restatements, at the theoretical level, combining the financial restatements and the reputation of the company, Chinese listed companies financial restatements reputation repair behavior observation, emphasizing the value of the specific repair behavior, to study the economic consequences of this behavior and positive impact on investors. This paper is beneficial to the study of the change of the company’s products or capital market after the company’s reconstruction. In this paper, we stand in the perspective of the company to see the financial problems, and actively take measures to deal with the reputation of the company, and to take the response of the market after the reconstruction of these behaviors. This paper is to observe the effect of company’s repair behavior, so as to provide a reference for other companies to rebuild their reputation. We could found that the credibility of the reconstruction has some rules after the financial restatement, which can provides the reference for rebuilding reputation behavior of listed companies, in order to make the behavior more targeted and effective.