Value Relevance Research On Fair Value Accounting

On February 2006, Ministry of Finance issues the new accounting standards system including 1 basic standard and 38 specific guideline and requires all listed companies to implement it starting from 1st January 2007. The new accounting standards included many great changes in some important aspects, and one of the key points is the use of fair value measurements. Fair value is the sum of actual or assumed fair transaction price of asset exchange and liability pay off made by both parties who are familiar with the situation in their own will, based on normal commercial consideration in the report day. From 1990s, whether fair value has value relevance had raised an intense debate not only between accounting academics and practice, but also between accounting standard setters and certain supervising bodies. Our country has been quite cautious to the exertion of fair value all the time, although the reuse of fair value shows concurrency of accounting standards, there are still gaps in the theory and application between foreign and domestic research. This paper researches on the value relevance of fair value accounting in new accounting system and the response of capital market to it.This paper selects the listed A shares as a sample and gets together five years dates, from 2007 to 2009. Through price model and return model, this paper studies the relationship between net assets measured at fair value (and changes of fair value) and stock price (and returns on stocks). Empirical research shows the following main conclusions:firstly, net assets measured at fair value and changes of fair value are correlated with the stock price and returns on stocks, so on the whole, fair value accounting information has value relevance; secondly, the results of grouping inspection according to profit and loss indicate that, the value relevance of fair value accounting information of companies whose net profits are positive is stronger than those are negative; thirdly, the results of grouping inspection according to industry indicate that, there are differences between industry on the value relevance of fair value accounting information, especially the result of banking and insurance industry is different from previous research; finally, the robust tests further suggest that fair value accounting information has value relevance, and its value relevance has timeliness. At the last part of paper, according to the results of empirical studies, I put forward some proposals on how to effectively implement the fair value in our country.