Prior research shows that when making investment decisions, mutual fund managers are concerned about accounting information and accordingly adopt different investment strategies. However, existing literature mainly focuses on accounting earnings itself while paying less attention to earning quality and ignoring that the usage of earning quality can be influenced by market conditions. Hence, most papers find that mutual fund managers do not extensively use earning quality. 　　When market conditions are becoming worse, the overall risks faced by mutual funds increase with the rising systematic risks. In order to decrease the risks, mutual fund managers have strong incentives to allocate more assets to stocks with high earnings quality. As the stock with high earnings quality is less sensitive to systematic risks with its price more stable and performance better than others, it becomes an ideal choice for mutual fund managers to avoid potential risks.　　Considering the potential effect of market conditions on mutual funds’ use of accounting information, this paper investigates mutual funds’ asset allocation strategy based on earnings quality under different market conditions. Our sample consists of open-ended mutual funds from 2005 to 2015 in China. We find new evidence different from existing literature that when market conditions are poor, mutual funds will invest more high earnings quality stocks. This finding is conducive to explain the mixed conclusions drawn from existing literature concerning whether mutual funds use information of accounting earnings quality when making investment decisions.　　This paper further explores the channel through which mutual fund managers shift their portfolios toward stocks with higher earnings quality. We find that mutual funds also hold more non-cyclical industry stocks which have high earnings quality. Mutual funds’ transferring portfolio assets between stocks of cyclical and non-cyclical industries are still based on their earnings quality. Uncovering the flight to quality （FTQ） channel from the perspective of relationships between the industry cycle and earnings quality is one of our contributions.　　Does FTQ have a positive effect on the mutual fund performance? The answer to this question is of great significance to systematically evaluate the investment ability of mutual fund managers and the value relevance of accounting information in investment decisions. We find that the flight to the quality behavior of mutual funds has a positive impact on performance, especially when market conditions are poor. It indicates that some fund managers have good stock selection abilities, and are able to avoid risks by making full use of earnings information and timely adjusting portfolios.　　Our findings shed light on understanding the role of accounting information quality in investment decisions. We show new evidence contributing to relevant literature that when market conditions are poor, mutual funds will invest more high earnings quality stocks. We also find that the flight to the quality behavior of mutual funds has a positive impact on mutual funds’ performance. This finding will help investors make a better understanding of how mutual fund managers use accounting information to make investment decisions professionally and more comprehensively evaluate the investment abilities of mutual fund managers.