Accounting Earnings, Cash Flow And Corporate Growth

As rational investors will be more focus on future growth potential with listed companies when they are going to make investment decisions, Corporate growth becomes a focus. Many scholars have confirmed that China’s capital market has value relevance of accounting information. However, whether the financial information based on the earnings and cash flow has relationship with business growth, that is, whether accounting earnings and cash flows are able to explain the corporate growth.For this problem, in this paper, we make modeling and do some assumptions, while we take advantage of domestic listed companies in Shanghai Stock Market from2005to2010data, and respectively test hypotheses by the mixed samples and annual samples. This study have found that accruals-based accounting earnings and net cash flow from operating activities can be able to explain growth of enterprises, and a combination of both have stronger explanation of corporate growth; In the sub-sample test of the year, cash flow has stronger explanation than accounting earnings, that is, as to an explanation of corporate growth, the information content of cash flow is greater than the accounting earnings.