Study On The Relationship Between The Listed Company Earning Quality And The Efficiency Of Investment And Financing

As the phased balance of an enterprise, earning plays a major role in thefirm’s sustainable and future development. It is meaningful for the firm as wellas its investors to create abundantly and reveal precisely the information ofearning. In addition, the bond market, presently the key place for listedcompanies to raise fund, has more requirements of listed companies to reveal itsinformation, including that of earning. Whether its earning information isproperly exposed can remarkably affect all the aspects of the management of acompany, especially those related to investment and fund-raising.In market economy, information is a key element for both investors andfund-raisers. The former always want to get access to the information of thetarget project or company because it is critical to the success of the investment;while the latter are generally absorbed more social idle funds and rationalutilization, laid the foundation for enterprise development to become the core offinancing purposes. Of all these pieces of information, the ones concerningearning are highly important, and therefore are paid much attention byfund-raisers and public companies themselves. This is because the knowledgeabout earning can be taken as some kind of forecast by investors andfund-raisers.In recent years, the earning quality of listed companies is not well,especially serious fraud phenomenon, because of asymmetric informationphenomenon, the low efficiency of investment and financing efficiencyhappened generally. On the financial crisis, this kind of phenomenon haveintensified trend. Based on this, this paper studied on the listed company of therelationship between earning quality and financing efficiency and investmentefficiency, respectively.This paper, based on the pre-existing results of former research, takes different economic environment and conditions into consideration, and usessamples of A-share listed companies, discusses the relationship between earningquality and investment/financing efficiency. Several discoveries have been made:firstly, improving earning quality can not only overcome under-investment, butalso curb over-investment, so that investment efficiency can be raised; secondly,the higher earning quality is, the higher financing efficiency becomes, whichmeans the two are in direct proportion to each other. Another discovery is thatSOEs to a certain degree weakens this proportional relationship.Therefore, this paper suggests that listed companies should start byimproving their own earning quality and also gives some advice on how toimprove earning quality from such viewpoints as listed companies themselves,functional government departments, and the effectiveness of the capital market.Hopeful the paper could not only provide the listed companies of our countrywith empirical guidance and data support on how to coordinate earning qualityand investment/financing efficiency, but also lay a theoretical foundation forgovernment regulators to strictly supervise the earning quality of listedcompanies, improve investment/financing efficiency, and guarantee the ordereddevelopment of the capital market.