Research On The Financial Restatement Of Listed Companies Based On The Readability Of Annual Reports

This paper focuses on the effect of the readability of annual reports on the financial restatement behavior of listed companies.The financial report of a company is an important medium for the information exchange between the management and stakeholders.The real annual report can provide investors with effective information.It is also conducive to the users of the annual report to continuously monitor the operation of the enterprise.Therefore,in the capital market,high quality annual report is very important.However,enterprises often issue low-level financial reports out of a variety of unethical intentions,in the form of content falsification of financial reports.Listed companies can not only falsify the digital information in financial reports,but also have room to manipulate the language information.One of the manifestations is to control the readability of annual report.And the financial restatement is based on this situation and it intended to do some remedy.Through the combination of theoretical analysis and case study,this paper selects Jiadian electric company from the manufacturing industry for case analysis.Then explores the relationship between the readability of annual reports and financial restatement behavior.This paper firstly analyzes the basic situation and financial restatement of the case.Secondly,introduce the case background and the financial restatement of Jiadian electric from 2011 to 2016 was studied,relevant theories including information asymmetry theory,principal-agent theory,internal control theory and impression management theory were combined to analyze the influence mechanism of the readability of annual report in the vertical time dimension and horizontal attribute dimension of financial restatement behavior.The study found that the lowreadability of the historical annual report made it possible for the management to whitewash the financial statement in order to avoid the implementation of the compensation agreement for the profit forecast of the material assets reorganization,which also laid a hidden danger for the financial restatement.Based on the public information of the financial restatement of Jiadian electric,this paper found that the readability of the historical and annual reports during the restatement affected the disclosure of the financial restatement.However,after the occurrence of financial restatement,the readability of the historical and restatement annual reports will further affect the market reaction and public confidence of the listed companies,and the supervision of the financial restatement by the regulatory authorities is related to the quality of the annual report.This paper enriches annals readability and study the relationship between financial restatements behavior of listed companies,the annual reports readability in the dynamic elements of financial restatement behavior is analyzed.Through studying the impact of the mechanism and the influence of annual report readability of financial restatement process,for the relevant regulatory authorities pay more attention to the annual report disclosure and it is of great significance to improve the quality of annual report.It also makes listed companies pay more attention to the annual report.In order to reduce the difficulty of annual report users to consider the annual report language,this is for the majority of investors to effectively evaluate the quality of accounting information of listed companies to provide effective exploration,in order to improve the quality of information disclosure of China's listed companies,so as to protect the interests of the majority of stakeholders including investors.