Research On The Positive Study Of Earnings Quality Evaluation

As an important parameter of securities market supervision, accounting earnings possess significant decision value. A series of accounting corruption events completely indicate that low earnings quality, which results from the financial corruption, earnings over-management etc, has become a world wide crux in capital market. Hence, the theoretical research and supervisory departments have come to pay highly attention on how to identify, evaluate and prevent corruptions and frauds, how to protect legal equity of investors as well as uphold normal market order.It has been about twenty years since earnings quality have been studied internationally, especially in recent years. Under the conditions of current terrible corruption; the study focusing on accounting earnings quality have been paid unprecedented heed in foreign academic circles.On January 2002, the American Accounting Association built up a item as"earnings quality", and then proceeded with further study on every aspect of earnings quality. In the AAA's 2003 Annual Meeting, earnings quality became a subject need to be discussed emphatically again. However, the researches of earnings quality in China lag behind relatively, the content of the research is not enough systematic and in-depth and the related study field is required to be extended as possible as we can.In view of current circumstances, low earnings quality which results from financial corruption and earnings management seriously not only mislead the decision of stakeholders such as investors, creditors etc, but also hold back the development of enterprises and constrain sustainable development; meanwhile, ruin the normal orders in capital market, lower the resource allocation efficiency in capital market as well as prevent from nicely development of the whole national economy. Consequently, as a crucial and urgent study subject, the further and systematic researches of theoretical and practical issues, which is relative to evaluation and analysis of earnings quality in listed companies, implying enormous significance to theory and practice. The main contents and conclusions of this thesis are as follows:1.On the basis of general analysis of accounting earnings and earnings quality, the author concentrates on the analysis and statement in theory for further evaluation and governance of earnings quality,including the development of the concept of earnings, the content of earnings quality, the quality characteristic requirement and the influenced factors of earnings quality. The author analysis different concepts of return such as economic return, accounting return and overall one, states the economic theory related to the evaluation, including economic earnings perspective, information perspective, modern valuation perspective, decision-making relevant perspective, contract perspective, and analysis the effects which these theories have made on evaluation and governance of earnings quality of listed companies. In terms of the characters of accounting information quality, the author compares with relative rules among FASB, IASC and Chinese Accounting Standards. After that, the author summarizes and analyzes the influenced factors of earnings quality, which lays a foundation for additional evaluation and analysis of earnings quality.2.From the view of financial report, the author mainly discusses the evaluation and analysis of earnings quality. The analyzed and evaluated methods of earnings quality are divided into three types: the qualitative analysis, single variable analysis and multi-variable one. The qualitative analysis such as Hawkins'accounting red flag, evaluates earnings quality through identifying the danger signals of the audit report, balance sheet, profit statement, statement of profit distribution, cash flow statement and the appended note to the accounting statement. The earnings quality evaluated through the single variable analysis can be called as static earnings quality, mainly emphasizes the analysis on time point, can comparative the earnings quality of listed companies horizontally, including security on cash index, the indication of sustainable development index, the structural index, the security index and the growth index. The single variable analysis can't evaluate the defects of listed companies comprehensively, so the multi-variable analysis is used extensively, including the time sequence comparison, the factor analysis method, the Dechow & Dichev model and the John model.3.Focus on the value relevance of earnings quality. Firstly, our measure of earnings quality is based on abnormal accruals. So through Dechow & Dichev model and John model, we obtain two proxy variables of earnings quality. And then, the author import this two proxy variables into price model ( Feltham-Ohlson model), and through financial data of Chinese agricultural listed companies in the year 2004, 2005 and 2006, explore the relation between stock price and quality of earnings. our research indicates: although in the sense market can identify different components of net income, for example, profit from operating and bottom-line income, capital market exist mis-pricing behavior on quality of earnings ( profit from operating ). It indicates China's securities market isn't reach the state of"semi-power efficient".4.Focus on the issue of earnings quality governance. Two aspects are discussed: how to govern the inferior earnings quality as well as how to improve earnings quality. Additionally, the key issue in this part is to raise a proposal that a multi-body earnings quality governance mechanism is a feasible solution. The author analyzes the norms development, fundamental environment and supervision regulation in terms of forming and affecting earnings quality governance of listed firms, and creates a tri-body multiple earnings quality governance mechanism which consists of three spheres: (1) the rules governance of earnings quality----the improvement and implementation of accounting standards; (2) the basic environment governance of earnings quality---- to improve corporate internal system arrangement; (3) supervision governance of earnings quality----the improvement and implementation of supervising regulations. After that, the author gives suggestions on the development of agricultural listed companies and the improvement of their earnings quality.