Analysis On The Effect Of Requirements Relaxation For ST Companies Under New “listing Rules”

Special Treatment is an unique system in China Securities Market, which is established to warn the poor performance of excessive speculating for stock in the secondary market and its main purpose is to guarantee a healthy and stable development of the market. Revised by the Shanghai Stock Exchange in July 2012,the new "Listing Rules" revised the delisting provision and trading & resuming suspension,easing the policies for those companies which delisted before the new "Listing Rules". In view of the "uncap" picking restrictions of *ST & ST,as long as the company has a positive net asset and can turn losses into gains,it can apply to remove the special treatment. The cancellation of the constraint called "the net profit after deducting non-recurring gains and losses must be positive" has greatly eased the constraints about the "uncap". This policy means that these companies can adjust non-recurring gains and losses to achieve profit, so as to remove the special treatment.The new "Listing Rules" has cancelled the restriction of “Positive net profit after deducting non-recurring gains and losses”, thus greatly relaxing the constraint conditions for cancellation of ST and helping *ST and ST companies to accelerate their paces of ST cancellation and return to the main board as soon as possible. After removing special treatment,will the management quality of ST companies' change or not? Is the "uncap" the result of a real performance improvement, the means such as earning management or the outcome benefiting from policy effect of the new "Listing Rules" ? In addition, will it have a negative influence because of the implementation of the new "Listing Rules" ?Therefore, based on the ST regulations in the stock market of China and combining the method of standard research and empirical research, the performance levels of public companies is analyzed in the study with ST cancelled before and after the new "Listing Rules" from the perspectives of market level and financial level after the ST cancellation announcement, so as to investigate on the effects of relaxed requirements for ST cancellation on ST public companies, which makes the theoretical study more comprehensive. In the paper, content of risk warning in new "Listing Rules" are systematically analyzed and objectively assessed in order to judge whether the public companies with ST cancelled can recover their earning capacity and get out of the financial trouble to enable the investors be more rational and make better investment to the stock market.Conclusions can be drawn that after the cancellation of restrictive conditions under the new "Listing Rules" : first, public companies with ST cancelled can increase their stock excess return in a short period and bring wealth effect to the shareholders of the company, but it is just of a short duration and the market will become inactive after policy change. Second, although the overall performances of the public companies with ST cancelled are experiencing a slight loss in the following years, the long-term performances of those companies are presenting the trend of increasing. Tests show that: the relaxation of ST cancellation requirements for ST companies proposed in the new stock listing rules has a short-term effect and has few effects on the long-term earning power of ST companies with ST cancelled. Finally, the paper ensures the effective implementation of the ST regulations monitored and reviewed by relevant departments and the delisting provisions for China's stock market, and focuses on whether the future earning and development capacities of ST companies can reach desired goals after cancellation of ST.