The Reaserch On The Impact Of Earnings Quality On The Efficiency Of Resource Allocation In The Capital Market

As the core content of the accounting information, earnings quality is an important characteristic of earnings. With the development of capital market in China, earnings quality gets more and more attention than earnings number, and it can reflect the intrinsic value and prospect of the enterprises. High quality earnings can reduce the information asymmetry to help investors to make correct investment decision, can reduce the transaction cost of enterprises, improve the efficiency of capitalization and lead capital to flow to industries which are more efficient and profitable, so that it can ultimately improve the efficiency of resource allocation in capital market. For both domestic and foreign scholars, most of them study the resource allocation in both capital market and enterprises from the perspective of accounting information, including micro and macro aspects. But the study simply from the perspective of earnings quality characteristic is not much. Based on the principal-agent theory, the asymmetric-information theory, signaling theory, efficient market theory and input-output theory, this paper proceeds from the characteristics of earning quality in financial reports and use theoretical and empirical analysis methods to investigate the impact of earnings quality on the efficiency of resource allocation in the capital market.This paper contains five parts. First of all, in the introduction, this paper introduces the background and significance, pertinent literature in this academic field, development of research ideas, research methods and innovation. In the second part, we define related concepts including definition and metrics of earnings quality and resource allocation in capital market. We also introduce theories such as the principal-agent theory, the asymmetric-information theory, signaling theory, efficient market theory and input-output theory, which are all important to this paper’ s hypothesis and verification. The third part states how earnings quality influnts the resource allocation in the capital market, and based on the analyzing, the third part put forward the research hypothesizes. One is that the improvement of earnings quality is helpful to improve the efficiency of resource allocation. The other is that state-owned property will have a negative effect on the first hypothesis. In the fourth part, this paper builds a model in reference to related literature. Using companies listed in A-share stock market from 2007 to 2013 as sample, the paper experiments empirical tests and does descriptive statistical analysis of earnings quality to examine the hypothesize which are put forward in the third part. Finally, according to the analysis of the empirical test results, the part five concludes:(1) As an important characteristic of earnings, the earnings quality plays a role in the resource allocation in capital market, and significantly increases the efficiency of resource allocation. Earnings with high quality can lead capital to industries with high return on investment, and it can help improve the efficiency of resource allocation. (2)And in state-owned enterprises, the effect of earnings quality to the resource allocation will be restrained. Finally, the paper also puts forward to strengthen information disclosure, to improve the regulatory system, and to improve the quality of the practitioners, which help the capital market to develop efficiently.