Research On Evaluation Of Earnings Quality Of Listed Corporation In China’s GEM

The earnings quality of listed company in China is generally on the low side. The accounting information of majority of companies which are selectively examined is distorted in different degree according to “The Selective Examination Notice of Accounting Information Quality”revealed by The Ministry of Finance in recent years, and financial fraudulences are often occurred which are reported by various media as well. Therefore, the financial reports revealed are shrouded in mysteries. Earning information is the most important, comprehensive in quality of accounting information and of most concern by investors. Furthermore, the quality of earnings is the core of accounting information quality, as it can truly reflect the economic results of the past and the present, and also can indicate the future economic prospects, and reveals the intrinsic value of a firm, thus, the quality of earnings is under various concerns by more and more investors, creditors, government and managers. But the performance reporting system of listed company in China still has not drawn enough attention to the quality of earnings. Consequently, establishment of the comprehensive evaluation index system of earnings quality has significant meanings in both theory and reality for the evaluation and analysis of business performance results and value discovery of listed companies.Based on the introduction and analysis of related theories and research findings about earnings quality both at home and abroad, firstly, this article illustrates the concept, features and influential factors of the quality of earnings. Secondly, combined with the characteristics of Growth Enterprises Market(GEM) and its’ earnings quality, the paper finds that the earnings quality has seven core attributes including authenticity, profitability, growth, constancy, safety, cash security and stability, then chooses fourteen financial indexes corresponding with those seven attributes stated before to set up a comprehensive evaluation index system of earnings quality of.The empirical research of this article selects financial reports of listed companies in GEM between 2011 and 2013 as samples, then gives weight by factor analysis method to establish a comprehensive evaluation model of earnings quality. Lastly, calculates the comprehensive evaluation index score, namely the EQI of earnings quality of sample listed companies. The author defines the quality of earnings as “the quality of earnings is a reliability that it can reflect the past as, present and future cash flow of a firm and reveal its’ intrinsic value ”.In addition, taking advantage of the correlation between earnings quality and stock prices, the paper tests the model by regression analysis and accordingly validates the assessment model of earnings quality. The result of research shows that the higher comprehensive evaluation index scores of earnings quality of the listed company, the higher the share price. It can be found that there is an obvious positive correlation between the EQI and stock price, thus verified the effectiveness and scientificity of the comprehensive evaluation index model of earnings quality of listed companies established above. Lastly, the essay displays evaluation and analysis of the sub-trade studies for earnings quality of listed companies in GEM using assessment model. The outcome in dates that the earnings quality of listed company in GEM of China is generally on the low side, the performance is unstable and has been slipping year by year, besides, there is a wide variation in earnings quality between different industries and companies. Consequently, the article puts forward related suggestions for improving the quality of earnings based on analysis above.