The Correlation Research Between Earning Persistence And Market Value

Obviously, accounting earning is the key index within the acquired accounting information. Not only it can reflect the past accomplishment of this company, but also it can predit its future development combined with other factors. So it has a greate significance to examine whether investor expresses a different reaction to different accounting earning based on the carefully analyze the information content of accounting earning.There are many index to express the value of the earning, but the pressistnece of earning is undoubtfullly a very important aspect, which can not only make an evaluation to the current accomplishment, but also can predict the future performence level of the enterprise.In consideration of low value of R2 in currently domestic research papers concerning earning persitence, and in the meantime, having not analyze this factor based on different business enterprise environment, so in this research paper, I pay much attention to the choice of the research model,sample and studying methods. Specifily, on one hand, I chose the commonly linearity regress model which have a constant and none as my research model; on the other hand, the listed company, which belongs to a growth type in the year of 2003-2007 as our research sample; finally, we adopt empirical study together with practical study as our research methods. And we obtains some faithfull conclusin.Specificly, this reseaech paper are divided five segment as fallows:Chapter one is exordium, it tells the background and significance of this research paper, it also mentions the research methold, the research objects, the research innovations of the paper, In views of the low quality of earning information of most listed enterprise, we undoubtbally have much reason to suspicion the validity of some literature based on the fact that the quality of earning is very good and the earning is persistence. So we chose earning persistence as our research topic, check up whether the earning persistence is really exists in the research objects and test whether investor can identify this kind of earning persistence.Chapter two, the basic theory and literature review. To be specifily, the basic theory includes three aspects:the meaning of the earning persistence, the calculation of the earning persistence and the relationship between earning persistence and earning quality. In the part of literature review, the author briefly reviews and analyzes some research fruits concerning earning persistence at home and abroad, and finds that many research literature were based on the fact that the earning of our listed enterprise is persistent and never gone deeply into study whether the account earning is persistent in the listed company and the self-character that different from the foreign stock market, which caused the value of coefficient of R2 is very low and the explaination of the model is not strong enough, In the meantime, a lot of research papers see the account earning of business enterprise as static of and consubstantial, have never gone deeply into classify the earning's persistence'of different type and its self-character in every development stage of the business enterprise. In order to solve those problem and get research conclusion, the author introduces into corporate life cycle theory and sees the account earning as dynamic and unconsubstantial, which is also a great special feature of this paper.In the chapter three, the corporate life cycle theory is used to analyze the earning's persistence from a new angle. Firstly, the author introduces the concept of the corporate life cycle and analyses the research significance from this aspect; finally, the author detailedly analyses the character of the earning's persistence in different enterprise development stage, which finds that at different life cycle stages of the enterprise, its profitability is not the same, hence its sustainability there are also differences in earnings. Obviously, compared to other stages, the growth stage companies with a earning sustained quite different, the earning persistence is also the most valuable to research. From the possibility of the study point of view, in the growth stage of the business, in order to meet the various harsh conditions of listing to the stock market, there is a strong motivation for earnings management of the enterprise, which affects the sustainability of earnings. From the study of the need for point of view, growth stage is a critical stage of enterprise development, which is a transition from earnings are not high to the continuing strong mature phase of the company.Chapter four is empirical study and analysis, which based on the listed company of growth stage. In this part, the author's clue is "whether the earning' persistence is exist in our listed companyâ†'whether The persistence of the different nature of the earning is differentâ†'Whether the investors can identify the persistence of different earnings." And the author put forward the hypothesis of this research paper, describes the data sources and study design. At last, we get the conclusion of this paper through rigorous empirical analysis as follows:1,The earning's persistence is exist in our listed company, which is similar to the findings of the foreign capital markets. So this is a common phenomenon in the stock market home and abroad. However, our study also finds that the coefficient of correlation between two periolds is a little low because of the adjustment of China's accounting policy and the earnings manipulation of the administrators, which leads to the value of R2 is very low and the explanatory power to the model is not very strong. At the same time, the author also finds that Both models, whether they have a constant, both have advantages and disadvantages. So we should be taken into account in subsequent studies.2,Every index of earning, such as main business profit, operating profit, total profit and net profit, have different persistence. Morever, with the evolution of calculation of earning, the earning's persistence is weakening. Among them, main business profit is the strongest and net profit is the weakest. This is in line with our expectations, because the profit, which comes from the main business, has the strongest persistence. Therefore,we remind Investors who concerned about the earnings of listed companies, should not only pay attention to the size of the earning, but also be even more in-depth to explore the nature of the earnings, which have great significances for investors or other stakeholders to forecast the company's future earnings. At the same time, the authors also considers the duration of the listing, which effect on the earning persistence. And find that, the longer the duration of the listing is, the stronger of the earning persistence is.3,By empirical study between earning persistence and market reaction, we find that, In the short term, investors began to "predict" unexpected earnings of listed companies within two weeks before the announcement of the annual report and this unexpected surplus are significantly positive correlation with excess stock returns. within two weeks after the publishment of the annual report, there appears a reversal effect. Investors experienced a transition from the overreaction to the earning before the publishment of the annual report to the rational adjustment after the announcement. In this regard which shows the invalidity of China's stock market,and they also show that the fluctuation of the stock market mainly due to the unexpected earning coming from the annual report. In the long term, if we have the lagged effect of the earning information takes into account, we find that the lagged effect also play a role in general within 9 months after the disclosure in its annual report. Due to the second year of the interim report of information disclosure, this effect reached the strongest in the first six months after the disclosure report.4,Investors only concerned about the size of the earning,not had an in-depth analysis of the information content hidden behind the earning numbers.Chapter five refers to the research conclusion and research inspiration.