The Study Of The Information Content Of Accounting Earnings

With the rapid development of China’s economic, the stock market is growing importance in economy development, which is required that the stock market should continuously develop and improve, improve the transparency and credibility of stock market information. Accounting earnings that reflect the economic efficiency of enterprises as an important indicator play an important role in the investor decision-making and the process of social resources.Our ministry of finance promulgated the new system of accounting standards on February2006.It includes the Accounting Standard for Business Enterprises No.34——Earnings Per Share and requires all listed companies to come into operation in January1,2007. It requires companies to show separately net earnings per share based on indicators in the income statement, regardless of whether it is negative, and disclose net profit basic of earnings per share and diluted earnings per share and weighted average number and the calculation in the notes of financial statements. Since the implementation of this No.34, many domestic scholars began to study disclosure and calculation of basic earnings per share and diluted earnings per share. But studies on the information content of earnings per share are few. For this reason, this paper selects the2007-2010Shanghai and Shenzhen100samples meet the conditions to examine information content and the differences of basic earnings per share and diluted earnings per share for stock prices, future operating cash flows by accumulated excess rate of return method, earnings response coefficient method, and linear regression empirical methods. In the process of research, the article firstly elicits the motive of the research and research significance and describes the ideas and research framework of this article. Secondly, it reviews the relative researches on domestic and abroad accounting earnings and the information of earnings per share. Thirdly, it details theoretical basis about information of accounting earnings and stock price relationship, explains the meaning and significance of information content, defines definition of the basic earnings per share and diluted earnings per share. Also this paper analyzes information contents contained in earnings per share and diluted earnings per share from the theoretical angle. Fourthly, this paper puts forward hypothesis based on the theoretical foundation and literature review. introduces the sample selection and data sources, and model building, then analyzes the model regression, tests the information content of earnings per share, and finally arrive at positive conclusions.The results show that the basic earnings per share and diluted earnings per share which are disclosed in the annual reports of listed companies include information content associated with stock price and next year future operating cash flows under the new accounting standards. Diluted earnings per share have basic earnings per share information outside of the increment; it also can provide more useful information for the report user.