Impact Of China Listed Companies Competitive Strategies Of Earnings Persistence

Accounting earnings play an important role in financial reports. They are crucialfor the user of the financial statements. For the existing of earning persistence, investorscan usually predict the future company status through the published accounting earningsin the financial statements to make better investment decision. Therefore, the earningpersistence becomes one of the most important indexes of measuring the quality of thecompany’s earnings and the key of the scholars’ study. Scholars domestic and overseasdid a great deal of research, from the definition of earning persistence to dividing theearnings to different parts. They usually divided them into two parts, the accrualcomponent of earnings and the cash flow component of earnings. Some divided accrualsinto discretionary accruals and nondiscretionary accruals, some even divided accrualsinto more parts. Then they did further research in every component of the earnings. Butthe conclusions came to be the same, that there is earning persistence, and thepersistence of current earnings performance is decreasing in the magnitude of theaccrual component of earnings and increasing in the magnitude of the cash flowcomponent of earnings.On the basis of research achievements received by the scholars at home and abroad,we used the model of Sloan (1996) and Richardson（2005）used in this paper, and didour study with the sample of Chinese listed company from the year2006to the year2012. We also studied accruals, operating cash flow, earning persistence, and the impactamong them. Compared with previous studies, we innovatively introduced variables ofthe cost leadership strategy and differentiation strategy in this paper, to test theirinfluence in earning persistence model. After the descriptive statistics, the correlationanalysis, the regression analysis and the stabilization inspection, we concluded thefollowing main conclusions:1.There is the phenomenon of surplus sustained in thelisted companies in our country, like foreign companies. Compared with operating cashflow, the persistent of accrued profit is lower.2. After joining competition strategyvariables, each variable is statistically significant, and compared with before joiningthem in, the models has more explanation. And it is concluded that the higher of thescore of low-cost strategy, the better of the persistence of surplus, so does the situationof the differentiate strategy.3. Subdividing the accruals and we found that low-coststrategies has positive influence for both manipulated accruals and non-manipulatedaccruals for the sustainability. While for the differentiation strategy, although it also has a positive impact on the sustainability of non-manipulated accruals, there is a negativeeffect on the sustainability of manipulated accruals.4. Particularly, the use of mixedstrategy leads Potter‘s “middle dilemma". The combination of the two types ofstrategies will have a negative impact for sustainability. Finally, the paper analyzes thedeficiency of the article, and gives the future research direction and practical advice.