Research On The Relationship Between Free Cash Flow Of Listed Companies And Their Stock Price

The stock price is influenced by many factors, different financial indicators have different effect and correlation on the stock in the accounting information that enterprise announced. By studying the relationship between accounting earnings indexes and share price, domestic and foreign scholars find that indexes of accounting earnings have obvious information contents, accounting earnings indexes have a positive correlation with share price in the quoted company, and the important role that it plays in share pricing has been demonstrated. In the late 1980 s, western scholars put forward the concept of free cash flow, our country carry out some research on this theory after that. However, because the free cash flow does not have a unified formula, theory itself is also more complex, in addition, the financial report does not disclose the company’s free cash flow directly,it is not easy for decision maker to get the enterprise’s free cash flow information, so its scope of application is also smaller. The financial crisis that happened in 2008 made investors begin to transfer their attention, and more and more attention focused on the effect of cash flow information on share price. Some traditional accounting earnings index can be easily manipulated, and easily influenced by the accounting measurement methods,due to the existence of such defects, investors have begun to question the reliability of accounting earnings index. In practice, free cash flow was studied in many aspects by scholars all over the world, but these studies are mostly in the American securities market environment, the research conclusion is not necessarily suitable for the securities market in our country. So the range of this thesis is the securities market of our country, through the study of free cash flow theory and its correlation with the share price, investors can synthetically assess the intrinsic value of the enterprise and make the right investment decisions.This thesis uses stock deal data and accounting report data from CSMAR database as the data sources, and research the correlation between free cash flow andshare price of the Shanghai stock listing corporation by establishing regression modelThis paper selects statistical software SPSS17 to analyze the data, and draws the following conclusion: in Chinese stock market, free cash flow and accounting earnings information show positive correlation with share price, but as investors pay more attention to the company’s accounting earnings information, therefore,accounting earnings have greater impact on share prices, and the correlation coefficient is higher. But from the correlation results of four consecutive years, we can see that the correlation coefficient of free cash flow per share and share price is increased year by year, while it is still lower than the correlation coefficient of the earnings per share, but the effect of free cash flow on the share price is increased year by year. Investors should pay attention to the free cash flow information, because in the securities market of our country, the free cash flow can have an impact on share prices to a certain extent. In the future, there is an inevitable trend that investors employ free cash flow information while making decision, and investors should also take the free cash flow into consideration to improve the correctness of the decision in the assessment of the value of enterprises.