A Synthetical Evaluation And Analysis On Earnings Quality Of Listed Companies In China

People pay more attention to earnings management, and the pertinent earnings control and accounting cheating, when Wall Street's biggest firms were involved in securities fraud that has been considered one of the most negative, discomforting occurrences in Wall Street history. In fact, earnings management like a coin has two aspects, which is used to deal with uncertainty and increase manger's own utilities. At the same time, it is inevitable that earnings management occurs for several luring factors, including internal and external incentives. However, vicious earnings management makes accounting information depart from enterprise's true value by seriously distorting accounting data, and affecting the quality of accounting information; accordingly investors are difficult to evaluate the real ability of earnings quality on the listed company. In conclusion, earnings quality analysis is useful for investor to make proper decisions.Firstly, we choose the basic definition and characters of accounting information quality as the start point of our research and illuminate the key factors which decide the earnings quality of companies. Subsequently we describe the definition and characters of earnings management, on the purpose of showing the relationship between the earnings management and earnings quality. Analyzing from three aspects: the balance sheet, the profit sheet and the cash flow sheet, we disclose the reasons why earnings quality is low and find ways to distinguish earnings quality.Finally, in the fourth part of this paper, we choose five factors that contribute to the earnings quality as the important point of our analytic demonstration, including the persistence of earnings, the stability of earnings, the growth opportunity of earnings, the cash guarantee of earnings and the faithfulness of earnings, and we use twelve parameters as symbolic representation of the five factors. Our findings, based on manufacturing listed firms in Shanghai stock market, used the twelve parameters as the proxy variable of earnings quality and the software of SPSS, we construct a model which is easy to understand and manipulate to synthetically evaluate the earnings quality on listed companies, therefore we could use this model to examine the level of the earnings quality on the listed company.