The Quality Of Accounting Informationand Its Influence On The Allocation Of Capital

A fundamental function of the capital market is to allocate capital efficiently. To achieve this, capital is supposed to be invested in the sectors that are expected to have high returns and be withdrawn from sectors with poor prospects. However, in realistic practice, the information asymmetry hinders the capital markets from working properly. Accounting information which shows the financial condition and profitability is essential in easing this problem. So, it is crucial to the financial markets. The quality of accounting information has been a topic of interest for over two decades. The analysis and discussion from different angles and level on the economic consequences of the accounting information have been investigated.The first chapter introduces the background of the study. The researches on the economic consequences, the impact accounting information on various segments of our economic society, are summed up and sorted out.Following are the theoretical elaboration on the quality of accounting information and the efficiency of the capital allocation.Then, Jeffrey Wurgler's model is been utilized to evaluate the efficiency of capital allocation in the Chinese capital market. The empirical studies on our stock market are then carried out afterward to analyze the influence of the listed companies'accounting information to our capital market.This paper explores that Chinese capital market do can allocate capital. The results also shed light on the influence of accounting information's quality to the efficiency of capital allocation. Based on the results of our study, some suggestions to our capital market and listed companies are raised in the last chapter.