Abstract: This paper studies the correlation between valuation and inventive role of cash flow information in Chinese stock market. Specifically, using data from year 2002 to year 2012 in Chinese stock market, this paper discusses whether there’s a correlation between valuation and incentive role of cash flow information, and what’s the difference compared to earnings information. The results show that there’s a positive correlation between the valuation and inventive role of cash flow information, but this correlation is weaker compared to earnings information. This paper is a complement to the studies about the correlation between valuation and inventive role of accounting information. This paper also can be a reference to people who care about valuation or compensation contract.

Key words: cash flow;valuation role , incentive role , correlation