Research On The Relationship Between Profit And Cash Dividend

China's listed companies began to implement the New Enterprise Financial Standards in January 1,2007. The New Standards introduced fair value, required to increase the scope of earnings disclosed, and change the structure of earnings. The New Standards added fair values to the operating profit, showed asset impairment losses separately from non-business expenditure and the costs, and investment income has been included in operating profit range, which makes operating profits have different meanings. In October 16,2008, the International Accounting Standards Board (IASB) and Financial Accounting Standards Board (FASB) jointly issued the <Discussion Paper—Preliminary Views on Financial Statement Presentation>. The discussion paper analyzed the problems of the financial statements present reported, and discussed how to construct a new mode of the financial states in order to solve the basic problem of the presentation of the reports.This paper uses normative and Empirical Study methods. Firstly, introduce the corroboration market effect of earnings and dividends, agency cost theory and the relevant laws and regulations. Explain the relationship between profits and cash dividends from the view of investors and management. Then analyze how the changes of the profit structure after the New Standards carried out affect the information about cash dividends contained in the profits by empirical research. Thirdly, analyze the relationship between the various parts of profits and cash dividends in the new mode. Finally, strip out the core operating activities profits. Provide users of financial statements high quality accounting information by the new model of income statement. These researches not only help to evaluate the economic consequences of the New Accounting Standards but also help to improve the presentation of the financial statements.This paper argues that the New Standards mix different items together, so the correlation between profits and cash dividends decreased. By referring the discussion paperⅠadjusted income statement. The empirical results showe that the correlation between comprehensive income, net profit, recurrent profit and loss, operating activities earnings and cash dividends increase successively. The reclassification of the profit shows clearly the correlation between accounting earnings and cash dividends and highlights the information reflecting the core value.Based on previous studies, I discuss the relationship between profits and cash dividends on two levels:the current and the next stage of the income statement's reform. In the part of decomposition of profits, the paper has two innovations:Firstly, reclassify according to the functions of economic activities and the relationship with the core objective of the enterprise. On the other hand, consider the accounting information about the cash dividends.