Study On The Evaluating Model Of The Listed Companies Value Growth Under The Environment Of Earnings Manipulation

The value evaluation of the listed companies is the foundation and premise of the equity reform, value investment and assets reorganization. However, the accounting information distortion caused by earning manipulation has grown to be the obstacle that influences the evaluation to the enterprise value. At the same time, the traditional methods that simplify conduct quantity evaluation on the enterprise value cannot satisfy the information demands of the listed companies to make strategy decisions as well as that of external stakeholders. Under the environment of earnings manipulation, how to evaluate the listed companies' value growth scientifically, objectively, fairly and entirely has become an urgent problem for the financial management academic circle and practice field.First, the study discusses the influences that the earnings manipulation to the enterprise value evaluating methods. Based on the analysis of the sources and appearances of earnings manipulation, the study conducts an behavior experimental research on external supervisory environment, information structure, reputation mechanism, manipulator risk preference and other factors that influence the earnings manipulation by establishing the virtual capital market; and reveals the formation and function mechanism of the earnings manipulation, and demonstrates the impossibility to eradicate it by the nature. At the same time, by contrasting the main value evaluating methods, such as the cash flow discount model and the economic value added (EVA) model, the study points out that these models may obtain distorted evaluating results since the basic data might be manipulated or the preconditions might not be satisfied.Next, the study establishes the Value Growth Quantity Evaluation Model based on the free cash flow discount; proposes the strategy-relevance evaluating objective and the value-relevance evaluating objective for value growth quantity evaluation; and demonstrates the possibilities that the cash flow index might avoid the earnings manipulation. Through the empirical analysis on 680 firm-year observations during the period from 1998 to 2005, the study proves that the free cash flow holds more optimal value relevance than the operational cash flow and the total cash flow. By analyzing the components of free cash flow, the study explicates the driving factors of enterprise value growth; establishes the Value Growth Quantity Evaluation Model based on the free cash flow discount by bring the value creation factor into the strategy management construct; and resolves the problem that how to harmonize and quantify value evaluation and strategy management.Thirdly, the study establishes and examines the Value Quality Evaluating Model. Considering the quality characteristics and quantity characteristics of the value, the study proposes the definition, connotation and functions of enterprise value quality, and establishes the four dimensional model of value quality evaluation based on the FAHP method. In this section, the study establishes the Earnings Manipulation Recognition Model by using the principal components analysis method and examines its authenticity; chooses the R/S analysis method to establish value trend index to reflect the stability; conducts Logistic regression analysis to examine the risks existing in the value growth process of listed companies; appraises the persistence of the listed company value using the Rappaport growth model.Finally, combining the quantity evaluation and the quality evaluation of value growth, the study establishes the Listed Company Value Growth Evaluation Model which is able to avoid the earnings manipulation influences to the greatest extent; conducts an empirical research on 41 listed companies of theetectric power industry in 2004-2005 and ranks these companies by the competition. The conclusion indicates that the model solves the problem that the quantity disjoints with quality in value evaluation, and reflects the value growth and the company's core competence from multi-angles. The study also explores the possibility to extend the value growth evaluating model and the value evaluating report.The findings in the study improve the insufficiency of the listed companies' value evaluating method, and provide a new kind of thought and method for the listed companies and their stakeholders to conduct value evaluation and value management.