Research On Influence Of The GEM Company’s Earnings Quality On Cash Dividend Payment

Earnings is an important direction to research cash dividend policy’s distribution ofenterprises. Scholars studied more from the aspects of profitability. However, profitability is justthe analysis of the operating results based on accrual. It’s uncertain that whether or not theseresults can eventually be transformed into real cash flow, can be sustained or grow healthily.So it is necessary to make a comprehensive analysis on operating results, they relate to thequality of corporations’ earnings and they also play an important role for cash dividend policy. Therefore,this paper research the influence of The GEM company’s earnings quality on cash dividendpayment.This paper based on existing study of profit quality, factors which affect cash dividendand influence of profit quality on cash dividend payment, and used signaling theory andprincipal-agent theory. firstly it selected447listing corporations of the GEM in Shenzhenstock exchange from2010to2012as samples. Then it constructed single index of profitquality and used factor analysis to construct comprehensive evaluation index and got factorscore and total score. Eventually it constructed the multiple linear regression equation to testthe influence of earnings quality and core quality characteristics on cash dividend payment.Conclusion of this paper verified influence of profit quality and core qualitycharacteristics on cash dividend payment. It is beneficial to make reasonable decision forsupervisors, managers and investors.There are two innovations in this paper. Firstly, it gave a comprehensive definition of thebasic connotation and core elements of profit quality, according to it, this paper constructedcomprehensive evaluation index and improved the theory of profit quality. Secondly, thispaper furtherly studied the influence of profit quality on cash dividend payment based oncomprehensive evaluation index.