Will Listed Companies Improve The Quality Of Accounting Information After Punishment?

Capital market is essentially an information market. The high quality of information disclosure is the cornerstone ensuring effective functioning of the capital market. However, in recent years there have been many events about listed companies’ violation, especially illegally information disclosure in China’s stock market. These events not only brought huge loss of benefit to the investors, but also turned out to be a great threat to the stable and healthy development of China’s securities market. According to the actual situation of China’s securities market and experience of capital markets in developed countries, the China Securities Regulatory Commission (CSRC) and the Security Exchange promulgated and implemented a series of information disclosure system and monitoring system in order to regulate the information disclosure of listed companies and impose penalties to non-complying companies. After been punished, the companies might possibly improve the quality of accounting information, but might also ignore the punishment and continue to break the rules in order to achieve specific interests.Based on this background, I selected462events of penalties for violations in Shanghai and Shenzhen stock exchanges from2000to2009, involving290listed companies as research object. Through analyzing the non-complying companies’ quality of accounting information before and after punishment, I explored the effect of regulatory agencies’punishment and its influencing factors and had following findings:(1) Punishment can stimulate the company to raise the level of information disclosure and provide investors with more fully transparent accounting information.(2) Appropriately increasing the penalties can make the effect of punishment more obvious.(3) If the companies were at a loss in the previous year and had a motivation of turning loss into gain, the effect of punishment would be discounted. But if under the heavy penalties, the companies would choose "correcting mistakes"-that is raising the quality of the information as the primary task.(4) There’s phenomenon of selective enforcement of regulatory in China, but unfair punishment can’t stimulate the companies to correct errors. Only appropriate degree of punishment can prompt the company to learn a lesson from the punishment, actively correct mistakes and provide high-quality accounting information for investors.(5) Investors would concern about the non-complying companies’information quality after punishment. If the companies "persisted in their error", investors would lose their confidence and "vote with their feet" which might cause a sharp fall in stock return. Only the attitude of actively correcting mistakes could win the confidence of investors and maintain the companies’image and prestige in the market.This research on the effect of punishment and its influencing factors will help to understand the inadequateness in current stock market’s regulatory mechanisms and further improve the information disclosure theory and regulatory theory and provide theoretical reference for the development of the securities regulation.