Financial Warning Study Based On Performance Change Of Chinese Corporations

Currently,Corporations in our country are facing great uncertainty.However,some of them will experience deficit or even ST(special treatment).Companies like this will not only cause terrific lost to their own investors,but also have a bad effect on the whole investment environment and country's economy.On the other side,since 23 th august 2005,china securities regulatory commission(CSRC)has started to implement non-tradable shares reform.Since that time the non-limitation for non-tradable shares largely extent the exploration stress our capital market is facing.Because CSRC increase the pressure between market requirement and supplement in tradable share,and big share holders can take advantage of their information accessibility and decrease their share before small share holders who are in inferior situation know,The current Performance preview has become a way for public companies to manipulate their the value of company shares.Based on the situation,big share holders' "Performance change" appears.Behind the "performance change",there are deeper problems.For example,lying on company profit and reports,which always come with a face that the company is actually having financial problems.This is a huge risk for other individual investors and small share holders because they lack of information and can easily be mislead to do a wrong investment.The article will focus on the following subtopics.Firstly,I will discuss why studying the warning signals sent by big share holder is meaningful.There will be a literature review about performance change,financial warnings and big share holders' behavior such as decrease their share.Also I will explain concepts like Principal-agent Theory and Information Asymmetry Theory and Financial Warning Theory and Investor Protection Theory.Secondly,I will apply those theories into a real case from a company named Shangdong MoLong.From 2015 to 2016,the heavy stockholders of this company whitewashed the quarterly reports of listed companies in order to create a good opportunity to reduce their shares.After reducing shares,they did a performance change.Through analyzing the reason why the heavy stockholder would take the action and the financial warning would become,I find the financial risk of the listed company which hided in the reducing shares action and whitewash the quarterly reports action of the heavy stockholders in order to help small share holders can easily find the financial risk of the listed company and be mislead to do a wrong investment.Lastly,I make some suggestions for the environment of signal identification of financial warning of listed company such as improving the information disclosure system and improving signal identification of the reducing shares action of heavy stockholders and whitewashing achievements action and improving the check and balance system of heavy stockholders,in order to help small share holders can easily find the financial risk of the listed company and be mislead to do a wrong investment.