Dynamic Measurement Of Earnings Quality In Pharmaceutical Industry Listed Companies

As one of the most important accounting informations,earnings is always concerned by investors, managers, creditors, government agencies and other related entities. And researches on the evaluation of earnings quality have also become more and more popular in recent years. However, most of the current researches are limited to the static measurement of earnings quality and cannot explain the dynamic characteristics of earnings quality. the results lack of predictability. This paper, starting from the above researching point and focusing on the properties and characteristics of earnings, makes use of Structural Equation Model approach to construct a dynamic measurement model for the earnings quality, aiming at giving dynamic evaluation on the earnings quality and providing scientific assessment for the listed companies in China.This paper takes the data of 87 listed companies in the pharmaceutical industry from 2007 to 2009 as the studying samples, and chooses four properties as the latent variables, respectively earning growth, cash flow, earning profitability and earning capacity. Considering the property characteristics of earnings quality of pharmaceutical industry, combining with structural equation model thinking, this paper introduced the PLS partial least squares algorithm to construct earnings quality measurement model and achieved the dynamic measurement of latent variables and analyze for three consecutive years earnings quality of the pharmaceutical industry and its various attributes latent measurement variables and dynamic analysis. The results show that the selected indicators can all effectively participate in the measure of earnings quality, and the four latent variables respectively produce different impacts on earnings quality. Amount of them, earnings profitability is the main factors to evaluate the earnings quality. By using the case tests of specific listed companies in pharmaceutical industry , this paper proves that the model constructed has good explanatory capacity, and therefore has scientific usefulness.In order to reveal the overall earnings quality of the pharmaceutical industry and its growing trends, this paper, based on the measurement results of PLS model, constructs LGM constructed latent growth curve model, provides a solution for the dynamic analysis of earnings quality for the pharmaceutical industry.