China's Listed Companies Accounting Earnings Quality Evaluation Studies

The traditional evaluation indicators of listed companies' profitability that based on earnings information reflect only the amounts of corporation's profits, while the quality and the ability to grow are not embodied. How to appraise comprehensively the earnings' amount and quality in the base of the accounting information under the current financial framework, to make the traditional profit appraising method perfect and then to improve the value of earnings information to make decisions, which is a problem of stock market to be solved urgently.There are obvious differences among the economic finance and accounting theory to explain earnings. The contemporary model of accounting earnings that based on accrual basis for accounting and historical-cost system is hard to show the level of earnings' quality. The quality of accounting earnings is influenced by many factors ,such as earnings' definition and its objective ,as well as the qualitative characteristics of accounting information the functional theory of earnings. The connotation of accounting earnings' quality that also can be considered as its theoretical appraisal standards is disclosed in the paper. And for the consideration of decision relevance and the facts, the evaluation standards of accounting earnings' quality in this paper is definited to be "the ability of list company's income keeping on the current level or keeping the increasing growth". Therefore the next five key factors of the quality of earnings can be deduced: authenticity persistence cash guarantee growth security, the decisive factors of accounting earnings' quality is analyzed as well, and then the evaluation indicator system of accounting earnings' quality of list companies is designed on the basis of the above. In the last of this paper, 157 listed companies of machinery equipment instrument industry in Shanghai Stock Market and Shenzhen Stock Market are chosen as the sample to carry on the positive research on comprehensive appraisal model of earnings' quality which designed by author. Results of the study show that the higher the quality of earnings is, the better the increasing trend it keeps. Thus the scientific nature and feasibility of this valuation methodare verified.