A Study Of Earnings Quality’s Influence On Investment Efficiency Of SME Board Listed Companies

With the constant adjusting of economic structure, SMEs, as important micro subjects in the national economic development, play a vital role in economic growth, employment promotion and innovation realization. Especially since SME Board set up, the development of SMEs has been closely related to the capital allocation of the whole society. The investment efficiency of SME Board not only affects the lifetime of the listed companies, but also makes impacts on numerous stakeholders and the development of the macro economy. Considering the existing research gap, this thesis mainly explores the mechanism between earnings quality and investment efficiency, aiming to enrich the economic consequences of earnings quality and make proposals of improving SME Board’s investment efficiency.Through literature review, this paper considers that earnings with high quality should be able to reflect the real operating performance accurately, have sufficient cash flow as a guarantee, can sustain the long-term development of the enterprises, and are beneficial to the stakeholders to make correct decisions. Based on the information asymmetry theory, principal-agent theory and earnings utility theory, this thesis makes subdivisions of the function routes to break the "black box". From the perspective of capital allocation, earnings quality can directly affects the selection and risk control of the investment projects. From the perspective of market pricing, earnings quality can alleviate the information asymmetry and reduce the financing cost, which will improve the investment efficiency. From the perspective of corporate contracts, earnings quality can develop supervision function, so as to ease agency conflicts and restrain inefficient investment.On this basis, this thesis takes SME Board listed manufacturing enterprises, which went public before2008and kept continuation between2009and2012, as research sample. Based on the truth, liquidity and asymmetric timeliness, whether earnings with high quality promote investment efficiency can be empirically tested. Research findings show that significant inefficient investment exits in the SME Board, and over-investment is more serious. There is a positive correlation between earnings quality and investment efficiency, especially for over-investment. However, the correlation between earnings quality and under-investment is not significant, which may be restrained by capital market’s reaction speed and investors’inertia. Therefore, in order to improve enterprises’investment efficiency, earnings quality should be paid more attention to in the operating process. Suggestions are proposed from six aspects to give full play to accounting’s pricing and supervision functions, including accounting standards, accounting control, financial analysis, performance evaluation, information disclosure and intermediary service. It is also the embodiment of accounting information’s decision usefulness.