The Market Reaction To The Earning Management Of XYZ Co.,Ltd And Responding Measures Of The Company

Under the domestic economy transformation and upgrading,as well as national strategy of innovation-driven development,Chinese online game industry actively responded to relevant policies with higher R&D investment.This also made them more innovative.However,without relevant supporting policies,supervision and the underlying earnings management motive of some companies,earnings management widely existed in this industry.Among these,speculative ones eonstantly identified and reported by media,causing market reactions swiftly in the era of internet.In the meantime,only few studies researched on how companies should respond to such market reactions promptly and efficiently.This thesis combines case analysis method with event research method.After analyzing the motives and methods of XYZ company,accordingly found 4 reports from the mainstream media in the securities market.In this thesis,CAR is used to measure the market reaction,and window period of these events are[-3,10].The purpose of selecting relatively short window period is to better analyze the nature,severity and effectiveness of company’s responding strategy in each event.It is also take long window period overlaps with other event days of XYZ constantly,thus weaken the correlation of events and the CAR into account.In these 4 CAR analysis,containing response speed and content of company in each events,namely:the coping strategies adopted by company and actual effects in eliminating market reaction.There are two main countermeasures taken by XYZ response to the market.One is to officially respond near the event day,and the other is to reduce the specific earnings management methods that have been paid attention to by the media.Combined with the analysis of the tripartite game in listed companies,extermal audit regulations and government supervision,XYZ has found that it has adopted a corresponding long-term response strategy,including:expense all R&D cost,manipulate disclosure level,and turn to aspects that have not fully noticed by media to conduct earnings management.In these coping strategies exist certain problems.At the end of this thesis,evaluated and suggested for improvement in XYZ response strategy under the current market reaction.