An Empirical Study On The Impact Of Canceling ST On Stock Price And Firm Value In Chinese Stock Market

In the early 1990 s,China created the Shanghai and Shenzhen Stock Exchanges,which marked a new stage in the development of China's securities market.Nowadays the number of listed companies in China's securities market has continued to increase,and the rules and regulations have also been gradually developed.In order to supervise and regulate listed companies to ensure the efficient operation of the market,the China Securities Regulatory Commission introduced a special treatment(ST)system in 1998,which implements special treatment for listed companies with financial anomalies or other abnormalities.As a transition and supplement of the delisting system in China's securities market,ST system transmits the operating information of listed companies and warns the listed companies to prompt managers to actively improve their operating conditions,which not only regulates the operating behavior of listed companies,but also maintain the interests of investors.After implementing ST,the listed company will forcefully delist if it can not get rid of the operating abnormalities within the time limit,so ST companies will take measures to cancel ST to avoid delisting.Canceling ST means that listed companies can get rid of abnormalities,and it will inevitably affect the stock price and firm value;As an important part of ST system,the effect of canceling ST on the stock price and firm value for listed companies is also related to the implementation of the ST system.Therefore,there is very important theoretical and practical significance to study the effect of canceling ST.Taking ST companies in the years between 2004 and 2015 as the research sample,this paper explores the effect of canceling ST on firm value and stock price by using the methods of event study and difference-in-differences(DID)model.Firstly,the empirical results show that the announcement of canceling ST could result in a significantly positive cumulative abnormal return,which indicates that canceling ST leads the market to respond positively,and ultimately increase the stock price;Further analysis of daily average abnormal return during the canceling ST period,the average abnormal return was significantly positive before canceling ST announcement,which indicates that the information of canceling ST can be anticipated in advance by the market and reflected in the stock price.Secondly,the empirical results of DID method show that canceling ST does not significantly affect the firm value.However,after the firm value(Tobin's Q)was specifically decomposed into the ratio of market value to book value,it was found that canceling ST increased the market value and book value simultaneously,and it was robust after a series of robustness tests.The above empirical results show that canceling ST has achieved market recognition,and has also increased the market value and book value of listed companies,and these performances are basically in line with policy expectations of ST system.