The Correlation Between Earnings And Stock Returns In China Based On Market Process

Accounting earnings as an important indicator which reflects the economic efficiency of the enterprises, plays an important role in the investors'decision-making and the process of social resources, because the economic efficiency of the enterprises influences the stock returns which is the investors'purpose.So both the foreign and domestic scholars put their focuses on the relationship between accounting earnings and stock returns. The previous research on this issue preferred the perspective of corporate characteristics, but rarely pays attention to the impact which macroeconomic factors have on the relationship between accounting earnings and stock returns. The process of marketization reform, as one of the macroeconomic factors, influences the existence and the development of an enterprise through the government intervention, protection of laws or regulations to investors and so on. Therefore, this paper chooses the perspective, the process of marketization reform, to explore its impact on the relationship between accounting earnings and the stock returns, in order to understand whether the process of marketization reform can have an effect on the micro-transmission mechanism and achieve the optimal allocation of resources.This paper selects the companies listed on the Shanghai Stock Exchange as the research objects, then reviews the related literatures and related theories on the relationship between the accounting earnings and the stock returns through the method of literature, and then proposes the two hypothesis of this study. When testing the first hypothesis, this paper adopts the multivariate regression analysis. At the basis of the first hypothesis, this paper uses the linear model and the non-linear model respectively to study the effect which the process of marketization reform have on the relationship between accounting earnings and stock returns.Through the empirical study, this paper draws the following conclusions:(1) both in the descriptive statistical analysis and the regression analysis, EQ in the area with higher degree of marketization is higher than EQ in area with lower degree of marketization, namely the process of marketization is positively related to EQ. (2) whether using the linear model or the non-linear model, accounting earnings in area with higher degree of marketization can better fit the stock returns than those in area with lower degree of marketization, namely the relationship between accounting earnings and stock returns in districts with higher process of marketization is closer than that in districts with lower process of the marketization. (3) the non-linear model has more advantages than the linear model in area with both higher and lower degree of marketization when study the relationship between the accounting earnings and the stock returns.