An Empirical Study On Information Content Of Earnings, Cash Flows About Chinese Listed Companies

The issue of information content of accounting is always concerned by many researchers. There is a lot of information in modern society and the accounting earnings are considered as the most important and full of information content in financial statement. However, Balance Sheet exposed by the listed companies is accrual basis, so the data of earnings will lag behind the real economical environment and they could be changed. Therefore, people began to discuss the information content of cash flows which are cash basis.Do earnings or cash flows have information content? Which one has more information content? Do operation activities cash flows, investment activities cash flows and financial activities cash flows data have incremental information content relative to that contained in earnings? Contrarily, do earnings data have incremental information content relative to that contained in operation activities cash flows, investment activities cash flows and financial activities cash flows?This dissertation is based on above questions. The data of this dissertation are collected from Shenzhen stock market and Shanghai stock market. According to the empirical result, we could find a few meaningful points: 1) The earnings data which are exposed by the listed companies can pass important information to investors and the profits can pass even more, but the earnings of losses barely have information content. 2) Operation activities cash flows, investment activities cash flows and financial activities cash flows can pass important information to investors, but compared with earnings, the later have more information content. 3) Operation activities cash flows data have incremental information content relative to that contained in earnings, but it seems that investment activities cash flows and financial activities cash flows have no incremental information content relative to that contained in earnings. Contrarily, Earnings data have incremental information content relative to that contained in operation activities cash flows, investment activities cash flows and financial activities cash flows. 4) When we think of the information content of earnings, operation activities cash flows, investment activities cash flows and financial activities cash flows represent more information content at the same time.All in all, earnings, operation activities cash flows, investment activities cash flows and financial activities cash flows can provide the information for investors and market.