Accruals Quality And Asset Pricing

Accruals quality, as a major component of earnings quality, is mainly employed to measure the matching between accruals and cash flow. As the most plausible indicator of earnings reliability, it can reflect earnings informativeness and most accurately mirror earnings quality, through the interaction and matching between accruals, various accrued items and such variables as cash flow and financial index.With regard to the study of earnings quality, domestic researches focus on the phenomenon of earnings management; specialized and systematic researches on accruals quality are few. On the study of accruals quality, having made big progress in the past decades, overseas researches place emphasis on value relevance by exploring the relationship between accounting earnings and changes in share price, however, as for the study of risk pricing of accruals quality, they draw no final conclusion that accruals quality can be regarded as a risk pricing factor that accounts for abnormal return on stock. With the rapid development of institutional investor after 2001 and the launch of QFII in A-share market, A-share market is in the transformation period of integrating with the international. Whether the proceeding of specialized investment in A-share market will promote the overall investment power, so that the true value of company can be more effectively evaluated and priced in the market, play the role of allocating resources and stabilizing the market, has been studied by nobody in our country. For that reason, this paper conducts systematic research on accruals quality, in terms of credibility analysis of accruals disjunctive model, the measuring and evaluating of accruals quality, internal factor that affects accruals quality, value relevance of accruals quality, continuity of accruals quality and earnings, predictability correlation, and risk pricing of accruals quality, etc. Concrete research content is listed below:1. On the basis of predecessors'research and by means of accruals separation method, this dissertation comprehensively compares the model fidelity by adopting three ways: testing error of first kind by Z-Statistic, using corporation in event as a sample to examine the error predicted by regression equation, and judging whether the discretionary accruals separated by comparison model has short-term effect. As a result, it is decided that the optimal accruals separation model is an aggregative model that can provide a feasible standard for accurately measuring earnings management variables.2. After analysis of the internal factors influencing accruals quality, this paper explores the relevance between internal factors of corporations of different earnings quality and earnings quality by employing Panel Data regression, with sample data divided into 5 accruals quality quintile. An empirical conclusion is drawn that in China A-share market, the instability of operating cash flow is the most important reason that causes listed companies'earnings volatility, which, to a certain degree, demonstrates that the major cause of listed companies'low accruals quality is the mismatching between revenues and accomplished cash flow in the accounting period.3. The influence of accruals quality on earning/price ratio, corporations'cost of equity's proxy variable, is analyzed by adopting Panel Data regression.4. Beginning with the correlation between accruals earnings volatility and accruals earnings predictability, this dissertation examines the continuity and predictability of accruals quality samples of different level through data from A-share market and autoregression, by building a research framework that combines accruals quality with earnings predictability and continuity through theory analysis. The empirical result indicates that the lower accruals quality, the poorer continuity of accruals earnings, namely, the poorer its predictability. The further study tells us that accruals quality directly affects investors' predicting of company performance and consequent valuation of company stock.5. With the proxy factor, AQfactor, of accruals quality introduced into three-factor model and four-factor model, this article gives an analysis of listed companies'accruals quality as an information risk pricing factor that accounts for abnormal return on stock in A-share market, by utilizing time series PLS regression to test. The empirical conclusion is made that there is no sufficient evidence that accruals quality can be regarded as a reliable pricing factor that accounts for return on stock.6. With institution shareholding variables introduced to explain the internal factors of accruals quality, this paper measures the relativity between institution shareholding and accruals quality, through Panel Data regression of gross sample and samples graded by AQ. The empirical conclusion is that institutional investors in A-share market can effectively identify the companies with abnormal earning volatility, namely, companies with the highest control of earnings. The empirical data, to some extent, affirms the professional investment ability of institutional investors.7. Furthermore, with the sample grouped at the average rate of institution shareholding, this dissertation employs time series OLS regression to test asset pricing. Through empirical analysis, we find that the professional capacity of discriminating accruals quality is not enough to have remarkable effect on A-share in terms of stock pricing; A-share investors are lacking in capability of evaluating accruals quality, which is mirrored in A-share pricing.