Research Of Listing Corporation Financial Restatement Based On Behavioral Finance Theory

Financial restatement is a company’s financial behavior, which the companyis finding, correcting the previous financial reporting errors and restatingfinancial statements. The remedy of the early report, will directly cause investorsto question the authenticity of financial information, and intensify the degree ofinformation asymmetry. Due to the increased risk of external information, thecompany’s cost of capital will rise significantly, eventually leading to that thecompany’s financing, management turnover and corporate value decline, whilethe external investors will lose confidence in company and individual orcollective take legal action. Facing such a serious economic consequence, thelisting Corporation has frequently issued financial reports of corrections andsupplementary. The financial statements in different time to correct is a violationof the requirements for the accounting information accuracy and timeliness ofaccounting standards, it is the hidden economic benefits that make the basicreason for the management of throwing the helve after the hatchet. In the righttime the actual information should be released, the listing Corporation throughthe representation of financial statements to lower the cost of financing andachieve the purpose of earnings management. However, as a kind ofphenomenon in the stock market, financial restatement is not the results of thecompany party behavior. we can believe that the emergence of the two party ofmanagers and outside investors cause this phenomenon. In view of thisphenomenon, this paper from the behavioral finance perspective of non rationalinfluence attempts to study the financing needs, analysis of the financialrestatement of the listing Corporation.467listing Corporation in Shenzhen stock market of China from2011to2013, their annual financial restatement show that, stock price change before andafter restatements time, then we analysed the financing demand motive offinancial restatement. Using financing demand motivation by managers and investors’s non rational framework of listing Corporation financial restatement,we could draw the following conclusion: financial restatement can be consideredas a game of internal managers and outside investors. Assumption of theinvestors and managers are rational, because of the information asymmetry andthe cost of financing, listing Corporation in the implementation has financingneed by financial restatements; rational investors and managers or investors ofnon rational, the company through the financial restatements will eventuallyrealize the external equity financing. Finally, both the non ration of investors andmanagers, their decision will deviate from the real accounting information,making the stock value does not match stock price, in the strong financingdemand will facilitate the financial restatement. On this basis, we give advice forinvestors and managers to invest rationally, reducing the managers and investorsto behave in irrational way and prevent non financial restatements.