title: Crisis-like behavior in China's stock market and its interpretation.
abstract: In order for China to play a bigger, more positive role in the world, it is important for China to have a healthy capital market. This perception motivates us to examine the health of China's capital market, especially the severity of the overall loss of the listed companies in China and the effects of accounting irregularities on the losses. We show the overall loss of the listed companies was very severe, in particular, crisis-like behavior emerged in the fourth quarter of 2002, 2004, 2005, and 2008. We further observe that loss in the fourth quarter was much greater than the average loss of the first three quarters in the same year. The most straightforward interpretation of this loss pattern is that companies underreported losses in the first three quarters, to boost their stock values in most time of the year. However, in the fourth quarter, accounting balance of the whole year dictated that the reported loss in the fourth quarter had to be much greater than the actual loss. Fortunately, such irregularity has been greatly reduced, thanks to the accounting reforms in China in 2007.
authors: Institute of Complexity Science and Big Data Technology, Guangxi University, Nanning, Guangxi, P. R. China; Business School, Guangxi University, Nanning, Guangxi, P. R. China.
authors: Fangli
authors: F
authors: Fan
authors: Institute of Complexity Science and Big Data Technology, Guangxi University, Nanning, Guangxi, P. R. China; PMB Intelligence LLC, Sunnyvale, United States of America.
authors: Jianbo
authors: J
authors: Gao
authors: Business School, Guangxi University, Nanning, Guangxi, P. R. China.
authors: Shuhong
authors: S
authors: Liang
mesh_terms: D000066:Accounting / Q000379:methods; D002681:China; D003132:Commerce / Q000379:methods; D006801:Humans; D007221:Industry / Q000379:methods