Empirical Research On Accruals Quality’s Value-relevance Of A-share Listed Companies In Our Country

In recent years, accounting fraud cases occur frequently. As the prevalence ofearnings management, the quality of earnings disclosed by companies has beenquestioned by people. The studies of earnings’ quality become the focus once again.We know that the existing financial accounting system is based on the accrual basis.Under accrual accounting earnings is formed by the accruals and cash flows. Cashflow as the achieved surplus is less maneuverable. The recognition and measurementof accruals are inevitable to rely on the judgments and estimates of the professionalmanagements and accountants. The existence of estimation error is inevitable. What’smore, accruals provide management the opportunity to do accruals manipulation. Allof these may cause the inconsistency of the accruals and the cash flows. The extent towhich those accruals map into cash flows is what we call accruals quality. Thenceexamining the company’s accruals quality reasonable, exploring the value-relevanceof accruals quality and checking whether the accruals quality will affect earnings’value-relevance can help to supervise our country’s securities market.It also can helpinvestors to make reasonable and correct investment decision, and then it will helpto improve the efficiency of resources’ allocation.So, this study has importantpractical significance.In this paper, we define the concept of accrual quality on the basis of previousresearch. Our study is motivated by recent theoretical research that shows earnings areprice-related information. Based on this theory, we propose three hypotheses aboutaccruals quality. However, the empirical results is contrast with our expectations,the result show that accruals quality is negatively correlated with stock price. In otherwords, investors price accruals quality incorrectly. To explore the reason, we use auditopinion as the proxy for the earnings quality which most of the investors can obtaindirectly. The results show that audit opinion and stock price are positively related.This result indicates that investors’ incorrect price of accruals quality is not caused bytheir negligence of earnings quality but maybe by the lack of professional knowledgewhich can help they to correctly identify accruals quality.