An Empirical Study And Case Study On The Excess Earnings Of The Report

In1970, Eugene F. Fama raised the "Effective Market Hypothesis". In his opinion, stock price can reflect all available information, which means investors can never make use of personal information to draw any abnormal return. However, lots of scholars found abnormal return in capital market, proving capital market was not effective enough. The study of behavioral finance in China emerged in late1990s, Zhao Yulong is the first scholar who research the abnormal effect of stock price after announcement of accounting information. This article aims at researching the relationship between performance pre-anouncement of "turn losses into gains" of listed company and its cumulative abnormal return relative to SSE (Shanghai Stock Exchange) Composite Index. According to research conclusion, under most conditions, the stock price of "turnaround" company has steady cumulative abnormal return after its pre-anouncement, which always lasts three to four months. The author constructed a stock pool, containing all the listed companies which published "turnaround" pre-anouncement in next accounting year’s January. According to last11years’historical statistics, in four months after the pre-anouncement, the stock pool has an average cumulative abnormal return of20.59%and11%in recent two years. Based on the above-mentioned statistics, the author emphatically studied the driving factors of cumulative abnormal return and eventually found that the improvement of management capability is strongly relevant with this return.