Study Of The Relationship Between Managerial Ability And Earning Quality Based On Listed Real Estate Companies.

In the current external reporting system, the financial statements is still the main way for the outside investors to know the enterprises’business conditions. In Balance Sheet, Income Statement, Cash Flows Statement and notes of accounting statement, people pay more attention on enterprises’accounting earning information. But under the influence of different industry backgrounds, macroeconomic environment, national policy, corporate accounting earning quality is uneven. In this case, the study of earnings quality has been concerned widely. Foreign author always focuses on the relationship between earnings quality and enterprise characteristics, such as management ownership, board properties. And the majority of domestic research is focused on the management characteristic such as top manager characteristics, shareholding ratio, salary incentive. Few people concern the influence of managerial ability.Based on the contract theory and information asymmetry theory, the paper, by means of empirical study, conducts deep analysis on the relationship between earnings quality and managerial ability and researches on the dependence between managerial ability and earnings quality of China listed realty business companies.First part, the paper summarizes the research result of earnings quality and managerial ability. Second part, the paper introduces the theoretical basis, summarizes the different meanings and measures about earnings quality and managerial ability and researches the relationship between managerial ability and earning quality. Third part, according to the new measure raised by Dermanjian(2013), using data envelopment analysis(DEA) to estimate firm efficiency. Because the efficiency measure by the DEA estimation is including the influence both the firm and the manager, we get rid of the firm influence by estimating model. We take China realty listed companies from2003to2012as its samples, getting the managerial ability data in the last ten years. Four part empirical analysis. Researching on the measure of earnings quality, from the perspective of earning structure, we used the modified Jones model to measure companies’ earnings quality, and we used earnings persistent to calculate companies’earnings quality from the perspective of accounting standard. Then it adopts the empirical approach of linear regression analysis to estimate the relationship between managerial ability and earnings quality. The result shows that managerial ability and m discretionary accruals is negative correlation relationship. More able managers are associated with higher earnings persistence. In other words, the higher managerial ability results higher earning quality. The results show that if we want to improve the companies’ arnings quality, besides strict regulations, we should improve the ability of managers such as learning ability, financial management ability, information processing ability.