Empirical Research On The Influence Of Public Company Sustained Earnings To The Pe Ratio

After global financial crisis, investors pay more attention on the recover efficiency of earnings and rational value. Higher attentions of investors push on the more earnings management of public company. Because of the problem of public company information disclosure, investors doubt the truth,usability and rational of public company. So the basis of investment value should be the value of future expected true profit of industry, means that PE ratio of sustained main profit.Firstly, according to the 11 years statistic result of public companies'earnings research, I found that sustained earnings tend to increase, but the whole level is low and investors tend to invest low sustained earnings companies when the market rises. Besides, investors have different earnings reaction of different companies, bull market like to invest higher earnings growth rate companies, and bear market like to invest lower earnings growth rate companies. The investors of A share market use PE ratio as their basis are efficiency, investors tend to choose low PE ratio company but too much rely on this indicator, they sometimes don't consider the sustained earnings and future profit.Then, this paper do the empirical research of the influence of sustained earnings of Shanghai shares and PE ratio, the result shows the positive relationship of cumulative abnormal return and PE ratio, the negative relationship of sustained earnings indicator and firm size. This means the market is irrational and inefficiency, higher speculation.