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Fuzzy information disclosure behind the word games

Author: NieManMan From: www.yourpaper.net Posted: 2009-04-30 02:29:21 Read:
[Abstract] listed company executives missing information disclosure filled with word games, to confuse the purpose to cover up the truth. This paper argues that legal action mechanism is radical word game after the punishment mechanism, and improve the efficiency of corporate governance is radical wordplay prevention mechanism.

First, the issues raised

In recent years, China's capital market prone to executives of listed companies disappearances, the year 2004 alone there are 10 listed company executives flight they have been dubbed the missing years. Funds or financial black hole caused by executives of listed companies missing swept away nearly 100 billion yuan, with a heavy blow to listed companies and capital markets. , Chairman of the South West (now ST South China, 000660) how is she Tong misappropriation of company funds more than 700 million yuan due to illness abroad for medical treatment, the original hops (now ST hops, 600090) Chairman EKORRE wood Aisha husband 988 million yuan front of the huge security "disappeared."
Executives missing, without exception, to the listed companies resulting in huge losses, so much concerned about the capital market, the information disclosure of listed companies executives missing but very fuzzy.

(A) disclosure is seriously lagging behind
Freeman Industries (now ST Freeman, 600781) disclosed Sunfeng Juan, chairman of the whereabouts of the announcement in Court the execution of the judgment, after four years in prison on October 29, 2003, October 10, 2002 has been under criminal detention.

(B) listed company executives missing information disclosure filled with word games
Its disclosure words vague, ambiguous and evasive, evasive, guess give investors a lot of space, so as to confuse and cover up the truth. From the U.S. Securities and Exchange Commission, said Arthur Levitt, former chairman of the listed company's financial fraud and profit manipulation of accounting to become a numbers game, people are mainly concerned with information disclosure at the digital level little attention to information disclosure language wording.

Second, executives missing word games

Executives missing is undoubtedly bad news, listed companies will minimize the adverse effects of bad news. Non-disclosure is clearly unwise, because no news is bad news in a competitive market, if the management of the valuable information hidden but at the reaction of investors to prepare for the worst. For example, when a company puts out a product and sales forecasting and competitive but remain silent, investors, customers and vendors such silence as bad news; If important information related to the changes in the industry to remain silent, investors will more uneasy. Therefore, the most common practices of listed companies is postponed or gradual release of bad news, in order to dilute the bad news may be quite explosive destruction. But directly in information disclosure on an issue easily be found and incur penalties, more subtle approach is to follow the basic information disclosure, content and requirements on the basis of fuzzy disclosure, it is not easy to find and difficult to punished, and a not very effective competition on the market, word games as the main feature of fuzzy information disclosure is enough to confuse the public, so that investors can not form a consensus, thereby reducing the negative reaction of the market for the bad news. Specific to the listed company executives missing information disclosure, this word game is mainly manifested in the following three aspects:

(A) The first word games are "rumors", the basic negative attitude
For the former honorary chairman, the Directors executives flight, GD (600,795) October 10, 2002 announcement that: "recent rumors, the company has been made to the State Power Corporation asked remained unanswered. When the "rumors" confirmed, GD did not honor the commitment to disclose information in a timely manner ".

(B) The second word games "Unable to contact noncommittal attitude
October 23, 2002, Freeman Industrial Board "(temporary) 14 of the second session of the Board meeting notice was signed", said: "As the Chairman of the Company Sunfeng Juan has been more than a month not to the company, and nearly half a month can not contact them, this instructed the Vice Chairman shall be exercised as chairman of the terms of reference. "until October 29, 2003, ST Freeman signed" significant matters are announced before kick chairman of disappearance mystery: "Sunfeng Juan on October 10, 2002 criminal detention, on November 15 the same year, was arrested according to law, the court sentenced the defendant on October 20, 2003 Sunfeng Juan guilty of false registered capital crimes at three years imprisonment, guilty withdraws the capital contribution sin term of imprisonment of one year and six months, and impose the implementation of the four-year term of imprisonment. "

(C) The third game of words "engaged in business activities or illness abroad for medical treatment, attitudes Kenya
Of Dahlman (600,788) Xuzong Lin, chairman of June 2004 visit to Canada and promised to return on July 15, 2004 on the ground to engage in business activities and to help the company's overseas financing, in fact, immigrants flight and thus has not returned. The original Cheng Cheng cultural Chairman Bo also plead illness flight, September 25, 2003 signed by the Board of Directors litigation Notice disclosure of "the former chairman Bo missing. In March 2004, Top Software (000583) Songru Hua, chairman of "should not be involved in the company's work due to illness.

Third, the legal action mechanism is radical word game after the punishment mechanism

Listed companies in executives missing information disclosure on playing with words reflects the regulatory defects, mainly reflected in the lack of legal proceedings mechanism. China's "Company Law" and "Securities Act" only fuzzy sets out the obligations of company executives should, without a corresponding punitive measures, and no specific action measures to protect minority shareholders' interests and penalties for dereliction of duty on the part of the managers. There is no punishment mechanism relying solely on moral constraints, executives for their actions is difficult some constraints due diligence obligations, but also on paper.
At present, the China Securities Regulatory Commission pursuant to the stock issuance and transaction management Provisional Regulations "and the" Interim Measures against securities fraud penalties for infringement of the information disclosure of listed companies are mainly two kinds of warnings and fines; basis of the Shenzhen Stock Exchange Shenzhen Stock Exchange Listing Rules and the Shanghai Stock Exchange in accordance with the Shanghai Stock Exchange Listing Rules "information disclosure of listed companies made the punishment a public reprimand, the internal criticism and ordered to make corrections in three ways. However, the event of Mao Zhirong (2002) analysis showed that the listed company information disclosure Exchange of internal criticism of the punishment is not enough of a deterrent of listed companies, the company's share price of non-compliance was no significant difference before and after the punishment. In addition, our information disclosure ex post facto punishment disclosure violations focused on three types of information: the information is not disclosed, including not to report major announcement information and deliberate withholding of information or there are many material omissions; false information disclosure, including the issue of false representations and after the listing of false information; the unauthorized disclosure. Obviously, word games as the main feature of fuzzy information disclosure has not been included in the list of penalties.
And to require listed companies to its information disclosure violations bear substantive responsibility in our country there is no judicial precedent. Red Industry (600083) event, the proceedings of the minority shareholders by the court to the cause of action does not hold dismissed; Yinguangxia (000557) Event court them, lack of technical grounds will not be accepted by the minority shareholders the management and intermediaries litigation. Until January 15, 2002, the Supreme People's Court on the admissibility of the False Statement caused tort disputes, only open the door to claims for the majority of investors. January 9, 2003, the Supreme People's Court issued the relevant provisions of the Supreme People's Court on the trial of the False Statement rise to a civil compensation cases ", which marks the small and medium investors false statements of listed companies litigation into the substance of the judicial process, but these litigation truly effective measures will take time.
Theoretical studies have shown that legal proceedings can significantly promote the release of bad news, can effectively cure the word games in the information disclosure mechanism to establish legal proceedings. The disclosure late announcement earlier than the time of disclosure announcement relatively weak market reaction, but due to the reaction of investors bad news is better than a strong reaction to the good news, the company delay in disclosing bad news and good news early disclosure tendency (Chenxiang Min Tan Yonghui, 2002). Therefore, if there is no legal proceedings, the Company will only disclose information to their advantage and will not disclose information against themselves (Dye, 2001), but the existence of the litigation costs may make the company more willing to disclose bad news (Healy and Palepu, 2001 ). Early disclosure to investors can reduce the inappropriate behavior of managers, non-disclosure of information to the grounds of the lawsuit filed, can reduce market transaction price is misleading probable losses thereby reducing the possibility of legal proceedings the amount of compensation. In addition, the Securities Litigation imposed on many of the costs of the company, dispersed managers engaged in the production of energy, increase the attorney fees, damage the reputation of the companies and managers. When corporate earnings significantly lower than investors expected, increased legal risk, companies have an incentive to take measures to reduce legal risk. Skinner (1994) pointed out, take pre-emptive measures, such as earnings warnings issued on a voluntary basis, can effectively reduce the possibility of legal proceedings. Be seen, the existence of mechanisms of legal proceedings, on the one hand, the listed companies for their word games to bear the enormous litigation costs and thus not dare to play word games; the other hand, listed companies can take the initiative and timely disclosure of information in order to avoid the risk of possible legal .
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