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Chinese listed companies accounting earnings, cash flow value correlation Research

Author: ShiYuJie From: www.yourpaper.net Posted: 2009-12-01 06:08:07 Read:
[Abstract] accounting information useful decision making is one of the basis for the existence of the financial and accounting indicators reflect the accounting information focused on accounting earnings and cash flow. Accordingly, our accounting researchers launched a multifaceted study of the value of China's listed companies accounting earnings and cash flow. Can provide each other with the increment of these studies were reviewed and found to be basic for the decision usefulness of accounting earnings and cash flow, sure, but compared to accounting earnings and cash flow, may have a stronger value relevance? information? "there is controversy and disagreement.
[Key words] accounting surplus cash flow value Summary

China's listed companies accounting surplus value

Chinese scholars in the value relevance of accounting information, the earliest and most mainstream accounting earnings value relevance. Many researchers samples of Chinese listed companies within the space and time as well as the type of subdivision, the investigation of all aspects of the use of different methods, models.
First of all, on the whole, the Chinese securities market accounting earnings value relevance of accounting information can influence the decision-making of investors.
Zhao Yulong (1998) is the first to use rigorous scientific methods the surplus value accounting of empirical research. This paper draws on the event study method, through the 123 sample companies in Shanghai stock market from 1994 to 1996, a total of 369 surplus disclosed in the eight weeks before and after the stock symbol rate of abnormal returns and unexpected accounting earnings between symbols the relevance of empirical testing, drawn in 1994 and 1995, accounting earnings are basically does not have the effect of price information content, but the results of the 1996 sample disclosure of accounting earnings information content and market effects, indicating The Shanghai stock market sensitivity Annual Report enhanced yearly. Chen Xiao, Chen Xiaoyue and Liu Chiu (1999), for the object, Shenzhen and Shanghai A-share company on the basis of the analysis of the trading volume, the use of regression analysis method to test the usefulness of the surplus figures. The results show that the new information does have arrived in the market, the transaction volume change in the earnings announcement date near, and confirmed the effect herald announcement effect; indicates that effect, and the Shenzhen market to a certain extent on the existence of surplus regression equation significantly stronger than the Shanghai stock market. The overall study results show that in China's A-share market, the surplus figures usefulness.
Secondly, the degree of correlation of different corporate accounting surplus value.
Because of the temporary differences, whether earnings, geography, time period, and many potential influencing factors, the degree of value relevance of accounting earnings information is very different. Upcoming samples during various subdivision different sample groups accounting earnings impact of shareholder returns. Hsiao Ke, Li Lingling (2004) as a sample to the Shanghai A-share listed companies, China's Shanghai data carried out a detailed comparison of the goodness of fit of the nonlinear model and the linear model. The study results showed that the samples or mixed samples of each year, the non-linear goodness of fit are greater than the goodness of fit of the linear model. And temporary projects excluded from the surplus, observed to a significant reduction in the goodness of fit of the nonlinear model, this persistent poor temporary project may be one of the reasons for a nonlinear surplus - return relationship . Meng Yan, Yuan Chun (2005) empirical analysis of the correlation properties of the surplus value of the company's accounting loss in the year 1998-2003, China's securities market A shares, results found that the loss company accounting surplus value significantly weaker than the profitability of the company. For loss making companies, the predictive ability of future accounting earnings to negative accounting earnings is clearly very weak.

Second, China's listed companies in the value of the cash flows related

Most of the studies concluded that the value of the cash flow correlation is lower than the value relevance of accounting earnings, or even that the cash flow does not have the value or negative value of the correlation. Yuan Chun (2005) making accounting earnings and cash flow value correlation comparative study found except in 2000, the cash flow data have a certain value relevance of accounting surplus value than the cash flow The value of correlation was weak, the explanatory power of the cash flows of the stock price is less than 10% of the accounting earnings explain. Chen Jing (2002) proved the value relevance of accounting information mainly on accounting earnings, cash flow does not have value relevance.
But studies have come to opposite results Xing Oriole (2001) for the sample stock to the Shanghai 30 Index and Shenzhen Component Index Stock research found that operating cash flow is the after-tax earnings caliber adjusted operating cash flow than earnings per share more accurately explain the stock price. Accounting earnings and cash flow incremental value relevant comparison with related

Compared to accounting earnings and cash flow, may have more value relevance? Whether it can provide incremental information to each other. Has been studied ambivalence. Commentary on this issue of whether the two can help each other to provide incremental information research below.
First, whether the cash flow of the incremental value relevance of accounting earnings.
Differences findings, some studies suggest that cash flow can not be provided on the basis of the accounting surplus incremental information, some studies considered. Time sequence will find the results to the cash flow can provide incremental information "on the basis of the accounting surplus offset the trend over time, this description of accounting information tends to be more reasonable investors are more rational.
Chen Jing (2002) prove that the cash flow does not have incremental value relevance. Jing Lu Meng Weidong, Liu Gang (2002) studies suggest that operating cash flow and free cash flow can provide incremental information on stock prices; COLLECTED ESSAYS (2004), the use of rewards regression model for operating activities by listed companies as disclosed in the annual report The net cash flow generated by the incremental information content of quantitative research. The study results showed that accounting earnings information disclosure by listed companies in China not only for investors, it is useful, and net operating cash flow in the statement of cash flows as disclosed by listed companies also have incremental value relevance.
Secondly, the incremental value relevance accounting surplus cash flow.
Because of basic recognition of the value of usefulness of accounting earnings, incremental information is relatively small, the main focus on the cash flow can provide incremental information, while relatively little attention to the opposite aspects. Liu Min (2001), the study suggests that accounting earnings and cash flow have value relevance and incremental value relevance to each other.

Fourth, future research prospects

In summary, most studies suggest that accounting earnings and cash flows of the listed companies in China have value relevance and accounting earnings
More than the value of the correlation is greater than the cash flow. The results of this study and the characteristics of China's securities market, investors increasingly become more rational, and the securities markets tend to improve, also tends to enhance the role of cash flow, the investigators of these factors should be considered, including, increase The value of the cash flows related research.

References:
[1] Ball, R., P. Brown.An Empirical Evaluation of Accounting Income Numbers. Journal of AccountingResearch, 1968 (Autumn) :59-178.
[2] Beaver, William.H .. The Incremental Information Content of Replacement Cost Earnings.Journal of Accounting Research, 1982 (July) :15-29.
[3] Chen Xiao, Chen Xiaoyue, Liu Zhao useful study of A-share earnings reports - from the Shanghai and Shenzhen stock markets, empirical evidence [J]. Economic Research, 1999, (06) :21-28.
[4] Shinong Wu, Li Chang Qing, Chen Bihua. Market reaction and the information content of China's listed companies cash flow analysis [J]. (Capital Economic and Trade University, 2001)
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