Research On The Market Response Of The A-share Listed Companies' Penalty Announcements

With the rapid development of Chinese economy and finance,the number of illegal acts of listed companies has been increasing in recent years,which has side effects on the healthiness of Chinese capital market and the interests of investors.After the investigation of regulatory institutions,the illegal companies would receive corresponding penalties which would then be declared to the public.By studying the market response to Chinese A-share listed companies' penalty announcements,this paper aimed to have a better understanding about the operation of A-share market and its efficiency of resource allocation.In addition,this paper analysed the types and numbers of different penalty announcements in order to lead listed companies to improve their internal control to prevent illegal acts as well as to lead regulatory institutions to focus on vulnerable areas.Furthermore,this paper studied the market responses of different types of penalty announcements to have a better understanding of their differences,which can provide investors with guidance to analyse the historical information and business circumstances of the listed companies as well as to choose investment opportunities with prudence.This paper used event study methods,taking 738 penalty announcements declared by A-shared listed non-financial companies during 2015 to 2017 as the sample.By calculating the abnormal returns and cumulative abnormal returns,the paper studied the market response led by the penalty announcements during a certain period,including the response of the whole market and the different responses led by different types of announcements.Then,the results were tested by multiple regression analysis.Studies concluded that the A-share market has a significant negative response to the penalty announcements during the window period,but different types of announcements would lead to different responses.Relatively,the negative responses led by financial problems and invalid disclosure would be stronger than other types of announcements including misleading presentation,significant omission,disclosure delay and secondary market transaction.Based on this,the paper gave advice to investors,companies and supervisors respectively.