Construction and Application of Comprehensive Evaluation Model for Corporate Profit Quality: Data from Chinese Listed Companies
Author(s)
Download Full PDF Pages: 12-24 | Views: 135 | Downloads: 45 | DOI: 10.5281/zenodo.8329270
Abstract
The high quality of enterprise profits is crucial for the high-quality development of the economy. This paper proposes a comprehensive evaluation model for corporate profit quality based on the Decision Making Trial and Evaluation Laboratory based Analytic Network Process (DANP) technique and variable weights theory. The model is applied to Chinese listed companies, analyzing their profit quality from 2018 to 2022. The results indicate that the growth rate of profit quality declined in 2019-2020, and profit quality has been consistently decreasing since 2020. Upon further analysis of specific dimensions, it is observed that the profit structure and stability of listed companies have shown a continuous decline after 2019, with other dimensions also displaying unfavorable trends accompanied by significant fluctuations. Furthermore, an industry-specific analysis reveals that although the overall profit quality of Chinese listed companies has been declining since 2020, the profit quality of the scientific research and technical services industry has remained relatively high. This can be attributed to the impact of the COVID-19 pandemic, which resulted in poor and unstable profits for the core businesses of listed companies, leading to a weakened profit structure and stability, and an overall decrease in profit quality. During the pandemic, there was an increased demand for scientific research and technology, which drove the development of the scientific research and technical services industry and contributed to its higher profit quality
Keywords
Profit quality, Comprehensive evaluation model, Variable weights theory, DANP
References
i. Alabdullah T. T. Y. 2022. Management accounting insight via a new perspective on risk management-companies' profitability relationship. International Journal of Intelligent Enterprise 9(2): 244~257.
ii. Alabdullah T. T. Y., Ahmed E. R. and Ahmed R. R. 2021. Organization features and profitability: Implications for a sample of Emerging Countries. Journal of Accounting and Business Education 5(2): 43~52.
iii. Alabdullah T. T. Y., Ahmed E. R., Almashhadani M., Yousif S. K., Almashhadani H. A., Almashhadani R. and Putri E. 2021. How significantly to emerging economies benefit from board attributes and risk management in enhancing firm profitability?. Journal of Accounting Science 5(2): 100~109.
iv. Almashhadani M. 2021. A brief review of corporate governance structure and corporate profitability in developed and developing economy: a review. International Journal of Business and Management Invention 10(11): 42~46.
v. Almashhadani M. and Almashhadani H. A. 2022. The impact of ownership on profitability: an conceptual study. International Journal of Business and Management Invention 11(6): 01~06.
vi. Alvarez T., Sensini L. and Vazquez M. 2021. Working capital management and profitability: Evidence from an emergent economy. International Journal of Advances in Management and Economics 11(1): 32~39.
vii. Aydoğmuş M., Gülay G. and Ergun K. 2022. Impact of ESG performance on firm value and profitability. Borsa Istanbul Review 22: 119~127.
viii. Chen F. H. 2015. Application of a Hybrid Dynamic MCDM to Explore the Key Factors for the Internal Control of Procurement Circulation. International Journal of Production Research 53(10): 2951~2969.
ix. Chu Y. Y. and Wang A. W. 2000. Analysis of Profit Quality of Listed Companies. Accounting Research (9):31~36.
x. Dai L. and Wang J. 2011. Evaluation of the profitability of power listed companies based on entropy improved TOPSIS method. Procedia Engineering 15: 4728~4732.
xi. Dewi K., Djaddang S. and Supriyadi E. 2021. The Effect of Tax Planning and Voluntary Disclosure on Company Value with Profit Quality and Audit Quality as Moderation. Riset: Jurnal Aplikasi Ekonomi Akuntansi dan Bisnis 3(1): 373~388.
xii. Hakim M. Z. and Naelufar Y. 2020. Analysis of profit growth, profitability, capital structure, liquidity and company size of profit quality. Jurnal Akademi Akuntansi 3(1): 12~35.
xiii. Li H., Wen S. B. and Jiao R. 2019. DANP variable weight financial early-warning model based on the earning quality pyramid. Systems Engineering - Theory and Practice 39(7): 1651~1668.
xiv. Li H. X., Li L. X., Wang J. Y., Mo Z. W. and Li Y. D. 2004. Fuzzy decision making based on variable weights. Mathematical and computer Modelling 39(2-3): 163~179.
xv. Li D. Q. and Hao F. L. 2009. Weights transferring effect of state variable weights vector. Systems Engineering - Theory and Practice 29(6): 127~131.
xvi. Li D. Q. and Zeng W. Y. 2016. The effectiveness of balance function in variable weights decision making. Systems Engineering - Theory and Practice 36(3): 712~718.
xvii. Lim H. and Rokhim R. 2021. Factors affecting profitability of pharmaceutical company: an Indonesian evidence. Journal of Economic Studies 48(5): 981~995.
xviii. Liu S. and Li W. 2019. Indicators sensitivity analysis for environmental engineering geological patterns caused by underground coal mining with integrating variable weight theory and improved matter-element extension model. Science of the Total Environment 686: 606~618.
xix. Qian A. M. and Zhang X. M. 2008. Reconstruction of analysis system on the quality of profit structure under new accounting standards. Accounting Research (6): 31~38.
xx. Qian A. M., Zhang X. M. and Zhou Z. Y. 2009. Quality of earnings structure, core profitability and earnings persistence: Evidence from China's A share listed companies in manufacturing industry. China Soft Science (8): 113~123.
xxi. Romanova S., Maryanova S. and Naumov A. 2021. Analysis of the Key Financial Factors Affecting the Profitability of Enterprises in the Context of the Digitalization of the Economy. In Second Conference on Sustainable Development: Industrial Future of Territories (IFT 2021): 260~265.
xxii. Sensini L. and Vazquez M. 2021. Effects of working capital management on SME profitability: Evidence from an emergent economy. International Journal of Business and Management 16(4): 85~95.
xxiii. Shen K. Y. and Tzeng G. H. 2016. Combining DRSA Decision-Rules with FCA-based DANP Evaluation for Financial Performance Improvements. Technological and Economic Development of Economy 22(5): 685~714.
xxiv. Soltero V. M., Quirosa G., Rodríguez D., Peralta M. E., Ortiz C. and Chacartegui R. 2023. A profitability index for rural biomass district heating systems evaluation. Energy 282: 128395.
xxv. Suvvari A. and Goyari P. 2019. Financial performance assessment using Grey relational analysis (GRA) An application to life insurance companies in India. Grey Systems: Theory and Application 9(4): 502~516.
xxvi. Venkateswarlu R. and Bhishma Rao G. S. S. 2016. Profitability evaluation and ranking of Indian non~life insurance firms using GRA and TOPSIS. European Journal of Business and Management 8(22): 153~170.
xxvii. Wang J. 2022. Factor analysis for financial performance evaluation of listed Chinese medicine companies. Mobile Information Systems 2022: 2446779.
xxviii. Xu J., Akhtar M., Haris M., Muhammad S., Abban O. J. and Taghizadeh-Hesary F. 2022. Energy crisis, firm profitability, and productivity: An emerging economy perspective. Energy Strategy Reviews 41: 100849.
xxix. Yadav I. S., Pahi D. and Gangakhedkar R. 2022. The nexus between firm size, growth and profitability: new panel data evidence from Asia-Pacific markets. European Journal of Management and Business Economics 31(1): 115~140.
xxx. Yu H. Y., Chen L. W. and Chen C. Y. 2022. The profitability effect: An evaluation of alternative explanations. Pacific-Basin Finance Journal 72: 101711.
xxxi. Zhou X. S. 2004. On the valuation of profit quality of small profiting company based on relationship rules analysis. Accounting Research (2): 52~57.
Cite this Article: