Empirical Study Of The Existence Of Accrual Anomaly In Chinese Capital Market

Accrual anomaly refers to some systematic errors happen when the investors forecast future accounting earnings based on past accounting earnings, so we could gain excess returns through analyzing accounting accrual's information. Accrual anomaly is related to the kernel of accounting research and the quality of accounting standards, and challenges the base of modern finance research——efficient market hypothesis,arouses the attention of practitioners and the theoretic researchers.Some foreign researchers have found the evidence of accrual anomaly in the abroad capital market, some early researches also found the evidence of accrual anomaly in the China's capital market. The main purpose of the paper is to explore the existence of accrual anomaly in China's capital market. We select all the listed companies issuing A Shares during the 2001 to 2006 year in Shanghai and Shenzhen Stock Exchange, followed Slaon (1996)'method, firstly, we tested the differences between accrual and cash flow in forecasting the next year's earnings, and we found that the cash flow has more predictive power in forecasting the next year's earnings. Then we drawn on the experience from Mishkin (1983) econometric model of macroeconomic rational expectations hypothesis test, based on the accounting earning's persistence, we compared the persistence coefficient and pricing coefficient of accrual and cash flow, and we found no evidence of the existence of accrual anomaly. Finally, we used the method of chart display and constructing portfolio, and we found no evidence of the existence of accrual anomaly, too. After eliminating the companis reported loss, we got the same results, and the annually tests also showed the inexistence of the accrual anomaly.We confer that the reasons for the outcome may be related to the unique characteristics of China's capital market, because there are many flaws in the China's capital market, the investors do not make decision based on the sufficient and efficient information disclosed by the listed companies, non-rational behaviors extensively exist. and our research could go in deep in the methodology and scope of our current research, we could gain advices beneficial to the development of our country's capital market through using more accurate measurement and pricing model , we need deeper research in the future.