Policy Analysis Of Earnings Warning Behavior

Earnings forecasts refer to the provisional earnings of the company's reporting period voluntarily disclosed to the public by the managers of the listed companies before the formal announcement of the regular financial reports.

Generally speaking, there are two forms of earnings forecasts.

The first form is: prior to the end of the periodic reporting period of the financial report, the management of the listed company is based on certain assumptions to disclose the expected earnings information to the public in advance.

The second form is: after the end of the reporting period and the official announcement of the periodic report, the operating results of the company during the accounting period have become a fait accompli, but the exact data are not known, and the management of the company disclosed the earnings information to the public ahead of schedule.

At this point, the notice is not a predictive financial information in a strict sense. It is only because the disclosure of periodic financial reports is lagging behind, or because of the need to correct the first form of notice information, the management will issue the information on the periodic performance of the enterprise to the market in advance.

The regulatory authorities can reduce information disclosure by forcing listed companies to disclose information, so as to slow down the existing information asymmetry between management and investors.

Since 2002, the earnings forecast of listed companies has changed greatly.

On the basis of summing up the previous experience of earnings forecasts, the regulatory department has established the principle of "first quarter results after the first quarter forecast": if the company's management predicts that the operating results of the next reporting period may be a loss, or a significant change compared with the same period last year, it should give warning.

First, the disclosure of violations has occurred repeatedly, highlighting the importance and urgency of the protection of investors' interests. The implementation of the notice system has achieved positive results, and the relevant theoretical research supports the conclusion that the earnings forecast information is useful.

Earnings forecasts enhance the timeliness of information disclosure, improve the pparency of listed companies, help investors adjust their value judgments in a timely manner, release their performance risk early, and protect the interests of small and medium-sized investors.

However, the increase of the frequency of information disclosure only reduces the risk of the company to a certain extent, and does not bring the expected results of the filtering effect. The filtering effect is not yet obvious, which reflects the quality of information disclosure is not high, and a large amount of information disclosure can not help to evaluate the company value and promote the market's preference for speculation.

The consequence is that disclosure can not only act as a corrective intervention, but may become an accomplice in manipulating the market with information.

In China's securities market, disclosure violations occur frequently: Notice of advance loss is not disclosed, notice is not disclosed in time, and notice is frequently changed.

It is doubtful whether the notice frequently changes its face and shows the reliability of the information. It has brought a negative impact on the market and raised serious doubts about the usefulness of the earnings forecast.

Before the implementation of the notice on the quarterly report of the first quarter of 2002 in Shanghai and Shenzhen stock exchange in March 2002, the phenomenon of information unreliability has been revealed.

Some scholars have made statistics on the earnings forecasts for the 2001 annual report, and found that the performance of the first report period has changed frequently, and 59 companies have changed their faces, accounting for 16.03% of the total.

After the implementation of the notice, face changing behavior is not only convergent but also intensified.

Careful investors will find that the frequent appearance of the earnings forecast of listed companies will happen again in the 2002 annual report, which will make investors unable to guard against losses.

It is a frequent occurrence of the notice, and it is harmful to the fairness and seriousness of the earnings forecast system.

The randomness of information disclosure increases investment risk and market risk, and attacks investors' confidence in the securities market, resulting in instability in the market.

This suggests that the securities regulatory authorities should pay close attention to the reliability of earnings forecasts so as to prevent possible manipulation of stock price manipulation by information disclosure.

Two, it is urgent to strengthen the relevance of information. 1., the measure of profit is relatively simple.

The process of predicting information disclosure requirements is: no demand - total profit - total net profit.

In fact, the study of earnings response coefficient shows that information users focus not only on the final figures of financial reports, but also on the specific composition of earnings.

Some listed companies, such as directional optoelectronics and other earnings management through non recurring earnings, avoid early warning of performance, but the main business profits slide, causing investors to have illusions.

In this case, how to identify the core part of the company's surplus becomes the key.

However, notice information can not convey the actual situation to investors.

2., there is no explanation or vague description of the causes of performance losses and large fluctuations, and the predictive value of information is reduced.

The changing trend of business performance is important information of listed companies, which leads to many reasons for earnings changes. For example, changes in the external environment, the improvement of their management level, the impact of non recurring gains and losses, and so on, the reasons for the medium and long term performance of listed companies are different.

Most of the information disclosure of Listed Companies in China is a system driven behavior. Generally speaking, information disclosure is to meet the requirements of the Securities Regulatory Commission and exchanges, and the enthusiasm to voluntarily disclose information remains to be improved.

It is open to question that the disclosure standard of 3..

The earnings information disclosed in the notice is vague, and the corresponding interval range is not disclosed.

In addition, the surplus of some listed companies has changed greatly. Therefore, there is no need for advance notice because the rate of change has not yet reached the 50% standard stipulated.

But this "surprise" change makes stock prices fluctuate, and the effect of earnings forecasts is discounted.

People can't help asking: where is the basis of 50% as the criterion of importance?

Assuming that 50% is in line with the importance standard, why do 40%, 30% and even 20% do not meet?

From the empirical results, the company released the risk early through the earnings forecast, reducing the impact of the annual report on the market when it was officially disclosed.

Because earnings forecasts have information content, different types of trailers will have different effects on stock prices.

Even if the company's surplus changes below 10% may cause abnormal fluctuations in stock prices.

Two, we must ensure the quality and quantity of the announcement of earnings announcements.

Practice has proved that the advantages and disadvantages of Limited by Share Ltd are difficult to judge. If the information disclosure of stock market is short of the necessary quality standards, the information that is false or unnecessarily omissions is bound to be overrun. Investors and other information users will be unable to make the right decisions.

This situation will lead to speculation and fraud in stock market. Most rational investors will lose confidence and withdraw from the market. The efficient and orderly market expected by stock market regulators will no longer exist.

At present, there is generally a standard mechanism for guaranteeing the quality of accounting information disclosure in various countries' stock markets, which should be used for reference so as to ensure the quality of disclosure of earnings forecasts.

The first is to establish the basic principles of earnings forecast, namely, 1. principles of integrity.

Although earnings forecasts are based on the historical Earnings Disclosure criteria of enterprises, they are still based on the estimation and judgment of the management's completion of the future business plans. The management authorities have absolute information superiority, so they should be asked to make the most objective announcement in accordance with the principle of honesty and provide full disclosure of relevant information.

2. for reference.

Detailed written procedures and systems are not only conducive to future comparison, but also conducive to the review of superiors.

In the compilation process, the following basic steps should be followed: (1) determine the basic variables of the notice.

There are some factors that influence the future business results in earnings forecasts.

As a short-term forecast, earnings forecasts may involve items based on sub items, including sales volume, sales price, input quantity and input price; second, collect all kinds of information, including historical data and external data; 3. Choose appropriate compilation methods; fourth, establish basic assumptions; 5. Analyze the prediction results and predict the results; 6. Timely update the predicted results according to the updated information, and modify the predicted values.

3. implementation of dynamic monitoring.

The disclosure of earnings forecasts by the management is not the end of the prediction obligation.

We should establish regular comparison, analysis and correction system for the forecast data, keep abreast of the changed situation, and timely adjust and remedy.

4. corrections and updates.

The correction of earnings preannouncement information means that after disclosing the notice, the administrative authorities find that due to human errors in the compilation process (such as the basic assumption error) rather than the objective factors in the forecast period, the number of preannouncement is corrected, and the number of the notice is corrected.

Earnings announcement information update refers to the disclosure of earnings forecasts, due to the change of subjective and objective factors in the notice period, resulting in the failure of the preannouncement hypothesis, which affects the realization of the predicted earnings amount. The management then revise the earnings forecast to re disclose earnings information.

(two) to perfect the mandatory disclosure of information system, we should first establish the minimum disclosure requirements for the notice content.

The American Institute of Certified Accountants has made provisions on minimum disclosure requirements for financial predictability information, including sales revenue, gross profit, income tax, enterprise asset disposal and special items, net income and earnings per share.

The study of earnings response coefficient shows that information users attach great importance to earnings structure, and have strong interest in deducting earnings from non recurring gains and losses.

In the earnings forecast, it is necessary to stipulate that listed companies should explicitly disclose net profit, net profit after deducting non recurring gains and losses, main business income and investment income.

Secondly, the notice must disclose the basis of the preparation and explain it. Meanwhile, a warning sign should be used to alert investors to the risk of warning.

When announcements of earnings forecasts, management authorities should explain the basis and limitations of the notice, and inform investors of the problems that should be paid attention to.

Only when the management authorities fully disclose the most important assumptions of earnings forecasts and the key factors of financial situation, will it be helpful for investors to analyze and understand the performance of listed companies.

From the perspective of mandatory disclosure, in order to better reveal investors' information about business trends, we should ask listed companies to categorize and analyze the main causes of large fluctuations in order to further eliminate the information asymmetry between investors and listed companies, so as to identify the reasons for the fluctuation of stock prices.

Once again, we should improve the accuracy of forecast earnings data, use interval estimation to express the expected earnings figures in the reporting period, and require listed companies to disclose predictive financial information according to the quantitative criteria.

Finally, after the conditions are ripe, all listed companies are required to disclose the expected surplus of the next period.

(three) to strengthen the deterrent management, the problems arising from the disclosure of earnings forecast information of listed companies can not be handled in a timely and effective manner, reflecting that the daily supervision is not in place and the penalties for illegal and illegal punishment are not enough.

A timely and effective punishment for violations is a duty of the supervisory body.

The extent to which illegal punishment can form an effective constraint on listed companies depends on the following aspects: first, the degree of perfection of relevant laws and regulations.

It often appears that it is difficult for supervision agencies to identify violations of listed companies, and there is no basis for handling them. Therefore, improving the system of laws and regulations is the primary task.

Secondly, the supervision level and supervision efficiency of the supervisory organization are low. If the probability that the listed company's irregularities are investigated and dealt with is very low, the listed companies will take the initiative to increase the number of times they choose to violate the law.

Therefore, the regulatory authorities should strengthen the post hoc verification of earnings forecasts and strengthen the supervision of abnormal situations.

Once again, after the violation has been detected, the greater the punishment imposed by the supervisory organization, the lower the probability of the listed company's choice of irregularities.

(four) coordination of mandatory disclosure and voluntary disclosure of mandatory disclosure and voluntary disclosure is a complementary source of information.

Investors prefer higher quality information, whether it is mandatory disclosure of information or voluntary disclosure of information should be timely, accurate and reliable.

With the development of the securities market and the change of the company's living environment, the motivation of voluntary disclosure of information by listed companies has been constantly enhanced and put into practice.

Voluntary disclosure of information by listed companies can improve communication with investors, highlight the company's competitive edge, demonstrate the company's image and enhance its attractiveness to investors.

Therefore, we should continuously expand the scope of company information disclosure strategy through continuous improvement of mandatory notice, make full use of market forces to control information quality, coordinate mandatory disclosure and voluntary disclosure, so as to improve the quality of announcement information disclosure.

In order to protect the interests of investors, the listed companies should be encouraged to disclose predictive information voluntarily.

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