Research On The Evaluating System Of Earnings Quality Of Listed Companies In China

In recent years, the financial fraud events of listed companies emerge in an endless stream and the means of financial fraud is increasing. Investors, creditors and other stakeholders who pay lots of attention to the information of earnings evaluate the profitability of the listed companies based on the net profit or related index of net profit. These indicators are easy to be manipulated. Therefore, establishing a reasonable and scientific evaluating system of earnings quality which can evaluate earnings quality comprehensively is an urgent problem to be solved. At the same time, establishing an evaluating system of earnings quality has a very far-reaching significance to regulate the securities market, to improve the quality of accounting information of listed companies, and to protect the interests of the investors.Under such a background, this paper aims to construct a comprehensive evaluating system of earnings quality to provide some reference value for the investors and researchers. This paper defines the connotation and characteristics of earnings quality and selects ten financial indicators to establish the evaluating system, then calculates the index weight by entropy method and order relation method. After that, we use the comprehensive index weight to evaluate the earnings quality based on objective data and subjective evaluation.We take the empirical analysis based on the evaluating system, and make a comparison between earnings quality and net profit. We find that the net profit is out of sync with cash flow and the continuous stability and growth of profit can not be reflected from the net profit. Finally, we use the empirical research to test the evaluation model and find that the result turns out with accuracy and predictability of certain.