The Predictive Model Of The Listed Companies’ Financial Restatement

Since the public disclosure of the financial report, the phenomenon of the listed companies’ financial restatement is not uncommon in the stock market. In order to regulate the information disclosure of the corporate, the Commission has gradually improved the disclosure standards. To avoid false accounting information misleading the information users and ensure an effective operation of the market, Accounting Standards for Business Enterprises requires the companies to ensure that the accounting information is true and complete and a high-quality financial report is issued. However, the imperfect system is still left to the enterprise space of earnings management. Misstatement of the financial report prompts the behavior of the listed companies’ financial restatements has occurred and brings to the market a series of adverse effects. Therefore, how to anticipate and quickly identify the financial restatements in order to mitigate the economic consequences is the problem to be solved.The forecast of financial restatement has the following theoretical significances:The theoretical research of the financial restatement will help to discern the causes and related factors of financial restatement under the stock market environment; An empirical analysis of the financial restatements will help to screening which indicators would have a significant impact on the financial restatements and eventually establish a predictive model of the financial restatement.The forecast of financial restatement has the practical significances as follows:(1) Build a healthy information environment and maintain a normal trade order of the securities market. The prediction of the financial restatements can help regulators identify the high-risk listed companies which made a financial restatement and on this basis, guide the information disclosure behavior of the listed companies to create a more harmonious information environment. (2) Protect the interests of investors and enhance the confidence in the market. From the point of view of protecting the interests of the small and medium investors, the research of this article explores the prediction method of the financial restatements in order to reduce the occurrence of poor information disclosure and earnings manipulation.(3) Improve the corporate governance and enhance a social responsibility of the corporate. This study will help to enhance the companies’immunity of the information errors and promote the spontaneous improvement in the quality of information disclosure of the listed companies.The domestic and foreign scholars have maintained a high enthusiasm on the financial restatements, and achieved the fruitful results. Based on the theoretical study of the financial restatements, that is asymmetric information theory, principal-agent theory, transaction cost theory, the theory of internal control in four areas, and building the research experience in home and abroad, this article is looking for the motivation and influencing factors of the financial restatements to extract a set of predictors, and then establish an effective financial restatement prediction model. This article mainly uses a combination of empirical and normative analysis method, and is divided into five parts. The main contents include:The first part discusses the background and significance of the financial restatement research, the research ideas and content framework, the major research methods, the innovation. At the second part, the review of the literature focuses on the market responses to the financial restatement, and the relationship between financial restatements and earnings management, corporate governance, external audit. The summary of the domestic and foreign research will support the thesis of this article.The third part is the basic analysis of the financial restatement. Starting from the definition of the financial restatement, this part discusses the theoretical basis of the financial restatement, and then explores the institutional evolution and current situation of the financial restatements, the motivation and influencing factors of the financial restatements.The fourth part is the core of the paper-the empirical test link. The financial restatement samples and predictor (intrinsic motivation, corporate governance factors and external audit factors) are selected to build the the financial restatement prediction model (logistic regression model). The results show that the two types of factors have a common influence on the financial restatement. The accuracy rate of the final model is71.3%, indicating the predictive ability of the model. The fifth part includes the conclusions and recommendations, giving a brief summary of the article and making several suggestions for the improvement of the financial restatement system.The innovation of this paper is:by means of a logistic regression model, we find an innovative way to establish a financial restatement prediction model and provide a method of the financial restatement prediction, broadening the scope of the study of the financial restatement issues. The three main types of indicators used in the study on the basis of the theory of the financial restatements make up a set of original index system. The final determination of the financial restatement prediction model is to achieve the desired result. A certain extent of the model can be used as an adjunct of the regulatory authorities to identify the listed companies which are at a higher risk of the financial restatement.There are a few inadequacies in the course of the study. The financial restatement prediction mechanism as a way of identifying the errors of financial reports, can only play a supporting role and its real utility subjects to a further verification. The autonomy of the samples’collection is difficult to avoid. The scope of the study also failed to cover the whole listed companies, excluding the company of the supplementary announcements and a part of the missing data.