Earnings Quality Study Based On Cash Flow

This paper made the study based on the Earnings Quality theory, first introduced Earnings Quality literature from four fields:cash flow, structures, continuance, and timeliness of earnigs quality, and list the writers opinions with China's conditions. Then, in the light of these literatures, and considered of the situation of China, insert two variables in the DKW extend models, and constructed three models to study the Earnings Quality。Third, use the datas from sample companies take tests like expanded test, extract test, and so on. At last, this paper provided some suggestions about the way to help the capital market health and increase the earnings quality。In the positive study, This study selected 580 companies in 2002-2008 as the samples of this study from the Shanghai stock exchange and Shenzhen stock exchange, obtain the general characteristics from descriptive statistics, use Pearson and Spearman ways to analysis correlation of the models, and expanded the hypothesis take some extend test to the models, and strict the hypothesis to the constraint test. The conclusion at the last suggested that: Cash flow haves more informations than earnings, companies announce cash flow informations can help to improve the earnings quality, investors can use the cash flow information to increase the quality of the invest decisions.