The Research On The Relevance Of Fair Value Information And Stock Price

Since 1980s, fair value has gradually become the central issue of academia. Affected by international accounting standard institution, China begins to popularize and apply fair value. With the deepening of fair value, the discussion on fair value emerges. Especially after subprime mortgage crisis, the debate on fair value becomes white-hot. There are mainly two questions discussed by scholars. First, whether does fair value have the value-relevance? Second, whether does the fair value bring procyclical effect? The paper is intended to make research on the first question.In order to discuss the above question in detail, the paper employs normative methodology and empirical methodology. Before the empirical research, there will be some discussion on the related concepts of fair value.The paper firstly compares the characteristics of the definition of fair value from FASB,IASB and China, and finds that, compared with IASB and China, the fair value concept defined by FASB is more exercisable. Meanwhile, FASB attaches more importance to the reliability of fair value. China and IASB put more emphasis on the relevance of fair value.Secondly, the paper discusses the application status of fair value, and mainly analyzes some characteristics of fair value application in FASB, IASB and China. The paper finds that FASB employs the outflanking tactics in the process of popularizing its fair value belief. In the process of popularizing its fair value belief in financial instruments, FASB firstly stipulated that the fair value information of traditional financial instrument should be disclosed. After that, FASB promoted the recognition and measurement of traditional financial instruments in fair value. When realizing its belief in traditional financial instruments, FASB began to promote its belief to derivative financial instrument domain. In the process of applying fair value in the derivative financial instrument, FASB also disclosed the information in the statements firstly. and than recognized and measured the information in the financial statements. The process of 1ASB in popularizing fair value is the same as the FASB.The attitude of China towards fair value is flexuous. China falls behind FASB and 1ASB greatly both in theory construction and practice in fair value.After discussing the definition and application status of fair value, the paper will introduce some basic concepts about the value relevance of fair value. In the part, the paper will review the information quality of fair value, and mainly discuss the relevance and reliability of fair value. The paper thinks that the viewpoint "fair value has higher relevance and lower reliability" is not correct. Under different transactions and events, the usage of different measurement attributes will bring different relevance and reliability. After that, the paper discusses some concepts which will be employed in the empirical research in the paper. These concepts include effective market hypothesis, Fetham-Ohlson model and value-relevance.In the empirical section, the paper tests the value relevance of fair value from three perspectives. The paper firstly tests whether the market will respond to the items measured in fair value; secondly, the paper will test whether the value relevance of items measured in fair value and recorded in "capital surplus" will be lower than that of items measured in fair value and recorded in "current profit". Meanwhile. the paper will test whether market will respond more fiercely to the traditional operation profit than the fair value profit. The first hypothesis and the second hypothesis have been verified by the empirical research, and the third hypothesis is refused by the research.The results of the paper demonstrate that the items measured in fair value have higher value relevance in new accounting standards. Meanwhile, market responds more fiercely to the items measured in fair value and recorded in the current profit. The two results have provide some proof for the current discussion on value relevance of fair value and some empirical support for further development of accounting standards.