| Accounting earnings information is the issue of most concern to stock investors. And earnings persistence is not only the most important indicator of the quality of earnings, but also the basis for forecasting the future profitability of the company. In this paper, earnings growth is seen as the result of either revenue growth or cost reduction. Then we analyze earnings persistence in each of these two ways of growth. Based on above research, we study the internal relationship between earnings information and stock price combining with the efficiency market hypothesis.This paper shows that (1) earnings persistence exists in Chinese companies,(2) earnings growth brought in by revenue growth has higher persistence than that by cost reduction,(3) companies earnings have significantly positive relation with their rate of return on stock investment,(4)the volatility of stock price responses to the information of the two types of earnings growth. |
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