Research On Reasons And Economic Consequences Of Earnings Forecast Correction

In recent years,the phenomena of earnings correction of performance forecast have appeared frequently in China's securities market.In order to improve fairness,transparency,and efficiency of securities market,to guide investors to make correct investment decisions,and to protect the interests of investors,China began to implement the performance forecast system from 1998,reducing the wrong information between the management and investors of listed companies.Some improvement has been made through these years on the performance forecast system.In 2000,the number of pre-loss information disclosures was clearly defined.In 2001,the pre-loss system for performance expanded to the scope of the interim report.In 2002,the regulations announced for the first quarter of the previous quarter,and the 2006 regulations focused on the truth of the disclosure of performance notices.Although the securities market performance forecast system has undergone a series of developments in practice,there are still many shortcomings.In view of the performance forecast system play important role in the stability of the securities market,an in depth analysis of the reasons for the earnings correction of the performance of listed companies and the economic consequences will help to provide practical suggestions for the sound development of the performance forecast system.This paper selects the source of the 2018 performance forecast earnings correction phenomenon as a case study object,the reasons for the earnings correction of Liyuan Precision Manufacturing performance forecast and the economic consequences are analyzed in depth.Through case studies,first of all,it is found that there are many reasons for the earnings correction of Liyuan Precision Manufacturing performance forecast,including the sharp increase of financial expenses and the drag of the subsidiary Liyuan project and the poor performance of Liyuan Precision Manufacturing operation,resulting in a decrease in operating income.It is the main reason for Liyuan PrecisionManufacturing in the August 18 th,2018 amendment.However,through analysis,information disclosures such as suspected violations,bank accounts being frozen,equity pledges,and inaccurate positioning in the high-speed rail industry,are the reasons behind the performance of the earnings correction.Secondly,we found that the economic consequences caused by the performance forecast earnings correction are serious.Since the publication of the Liyuan Precision Manufacturing's refinement amendment announcement on August 1,the stock price declined sharply,and the market value has shrunk by nearly three in 4 days.Therefore,investors have withdrawn finance,and the company's core executives have repeatedly resigned,resulting in instability of the company's management,a crisis of trust,and extensive damage to its image.These directly indicate the serious economic consequences caused by the performance forecast earnings correction.Through in-depth discussion of the Liyuan Precision Manufacturing It is found that the reasons causing performance forecast earnings correction are complex and serious.in order to prevent the phenomenon of earnings correction from appearing in the performance forecast,this paper puts forward a series of countermeasures and suggestions to prevent performance predictions from earnings correction.Firstly,we must strengthen and improve the internal structure of the company by improving the selection and appointment of the company's management.Secondly.It is necessary to strengthen the combination of auditor supervision and other supervision.Thirdly,a punishment mechanism based on the degree of deviation should be formulated.Combining the reward and punishment mechanism of high-quality voluntary disclosure will ensure the important role of the performance forecast disclosure system in the securities market.Fourthly,the author suggests that investors should strengthen the ability to identify accuracy of performance forecasts,and reduce the loss of investment caused by low-quality information misleading.This paper changes the previous empirical research method of performance forecasting earnings correction,and conducts a variety of analysis and research on specific listed companies by case study,which adds a theoretical basis for the further improvement and development of performance forecasting system.