Research On The Consequences, Motivations And Influencing Factors Of Financial Restatements In Listed Companies

Financial restatement refers to the process of correcting and reconfirming errors or misleading information in the financial reports voluntarily or under the requirements of CPA and regulators. It’s the behavior of making up for previous errors. Financial restatement is meant to improve the quality of accounting information, but to achieve certain objectives, more and more listed companies take advantage of financial restatements as a means of earnings manipulation, which harms the interests of investors and disrupts the order of the capital market, making financial restatements system deviating from the original intention when it produces.At present, domestic and foreign scholars mainly use the method of empirical demonstration to study the problem of financial restatement. In this paper, we use the method of case analysis to study the case of Yaxing Chemical Co., Ltd. We will analyze the motivations, consequences and influencing factors of the financial restatement.The study finds that: Firstly, the financial restatements of Yaxing Chemical bring strong negative market reaction and cause a huge loss to investors. Secondly, the direct motivation of Yaxing Chemical’s financial restatements is to conceal violations and avoid delisting, but the tunneling behavior of the controlling shareholders is the root motivation. Thirdly, Disabled corporate governance mechanisms and weak external audit reveal the problems exist within and outside of the company. In this regard, in order to reduce the possibility of financial restatements, we should improve the financial restatements system and delisting system, improve corporate governance and the quality of external audits, increase government supervision and improve investor protection system.