An Empirical Analysis Of Listed Company's Earnings Quality In China

With a series of finance corrupt cases reappearing at home and abroad, earnings' reliability and relevance of listed company receives investors' question, The earnings quality becomes the focal point . Based on such research background and previous research findings, this paper will dwell on the issues of "what is earnings quality", "what is the earnings quality characteristic", "the affecting factors of earnings quality", "what present problems about the earnings quality of listed company" and "how to improve the earnings quality", in order to give a thorough and comprehensive understanding of the issues of earnings quality.Earnings quality refers on the basis of the company's financial report to be considered real, fair,just and comprehensive reflect the company's business result, the ability of earnings to transforms into cash and grow. Which contains three basic traits:authenticity, cash realizability and the ability of earnings sustainable growth.The main affecting factors of earnings quality are legal environment, external supervision, internal control as well as core competence of corporation. Legal environment and external supervision belongs to external influential factors, Internal control and core competence of corporation belongs to internal influential factors.Relying on the three traits of earnings quality and the affecting factor of shareholder, the paper constructs 12 evaluation indicators, uses the method of Factor to give a comprehensive evaluation of listed company's earnings quality from the year 2003 to 2005．As a result, we found that those listed companies which have meager profit or turn losses into profits are having poor earnings quality, especially earnings' authenticity and growth is difficult to get effective assurance, in addition,the ability of debt repayment in cash is insufficient;The earnings quality of industry plate and high-tech industry are poorer than public utilities plate and traditional industry ;Listed companies which is serviced by different size Public Accountant Firms have no significance difference in earnings quality; The earnings quality of state-owned company is poor compared with non state-holding corporation in the year 2004 and 2005．Due to verify the accuracy of the evaluation, the paper takes further test on the evaluating result respectively from above four aspects,that is earnings' authenticity,the ability of earnings transform into cash,earnings sustainable growth and the affecting factor of shareholder.The test verified that the evaluating indicators we construct could preferably express the characteristics of earnings quality. So, evaluating result could reflect the real condition of listed company's earning quality reasonably and objectively. Concerning the current problems of listed company's earning quality which were found in substantive analysis research, this paper then put forward some relevant suggestions, which can be concluded on three respects: First, continue to perfect the Accounting criterion and strengthen the exterior supervision.Second, reinforce internal control. The last one is to boost core competence of corporation At the same time, enhance the execution degree of law.