Research On The Market Reponse To Annual Report Inquiry Letter

In 2020,the State Council issued "Opinions on Further Improving the Quality of Listed Companies",which emphasizes on regulating corporate governance and improving the quality of information disclosure in improving the governance of listed companies.The report of the 19 th Party Congress emphasizes "transforming government functions and innovating supervision methods",and the practical and academic circles are highly concerned whether the financial reporting inquiry system plays its proper supervisory role.The Shanghai and Shenzhen Stock Exchanges have gradually broadened the external regulatory channels by establishing the inquiry letter and reply letter mechanism.The introduction of this system means that the reform of China’s regulatory system has begun to shift gradually from the SFC to the exchange,thus playing a front-line regulatory function.Based on the unique background of China’s regulatory system and on the basis of combing domestic and international literature,this paper takes Hangzhou High-Tech as the research object,takes Hangzhou High-Tech’s receipt of three annual report inquiry letters as the research event,takes the theory of self-regulation of the exchange as the basis,combines the information disclosure system and the regulation theory of the stock exchange,and improves the case study analysis on the effectiveness of self-regulation of the stock exchange in China.This paper mainly adopts the event study method and comparative analysis method,starting from the process of case company introduction,inquiry process,market reaction and influencing factors,and deeply analyzing the potential problems of the company and the reasons of being inquired,to further explore the financial fraud of the company and the effectiveness of the regulation of the exchange.After a detailed and in-depth analysis of the case,this paper summarizes the following conclusions: Firstly,the issuance of annual report inquiry letters by the exchange has a significant impact on the market reaction of the company,specifically in the form of negative market reaction when the letters are received.Second,the degree of market reaction varies depending on the type,number and quantity of letters received,and it also affects the size of market reaction depending on the time and clarity of the response.To this end,this paper provides the following suggestions from the perspective of the exchange and the company,respectively: firstly,the stock exchange should continuously supervise the companies that have issued letters,improve the regulatory system of inquiries,and enhance the deterrent effect of inquiries;secondly,companies should pay attention to information disclosure,strengthen corporate governance,and reduce the frequency of being asked as much as possible.Finally,the significance and innovation of this paper is that it adds new case study evidence to the study of the effectiveness of the stock exchange inquiry mechanism,and also provides certain suggestions from a targeted perspective,especially for case companies with a high number of inquiries.The incorporation of inquiry letters into case studies broadens and refines the domestic research on the actual effectiveness of information disclosure by listed companies in the GEM market.It not only enriches the case studies of inquiry letters,but also provides relevant practical references for sound regulatory policies on inquiry letters.It is expected to provide some theoretical support and case reference for the financial management of listed companies and the implementation and strengthening of the regulatory system of inquiry letters in China’s stock exchange.