Research On Value-relevance Of Financial Assets' Fair Value In China

The Ministry of Finance has promulgated new criteria for enterprise accounting in 2006 , adopting fair value to measure hold-for-trade financial assets and available-for-sale financial assets ,split-share reform has completed in batches in 2007, limit sale shares become tradable shares gradually, the original non-tradable shareholders began concern about stock prices as same as the tradable shareholders; In April 2007 the outbreak of the U.S. Sub-prime crisis evolved into a financial crisis, and quickly spread to the whole world, the fair value recognition and measurement become a hot topic ever. Against the above background, this article from the decision usefulness of accounting objective, stand on the concept of measurement perspective, the use of improved Feltham & Ohlson (1995) price model to inspect the value relevance between two types of fair value variation of financial assets and stock price.The first part is the theoretical basis. Defining the concept, clarifying the theoretical basis, and reviewed the historical changes of the U.S. FASB, the International IASB and our CASC on the fair value of financial instruments, the theoretical basis showed that the fair value measurement and stock price (firm value) has value relevance.The second part is a literature review. Under theoretical basis, this chapter reviews literature of value-relevance of financial assets'fair value with stock price (firm value), which has the same research scope and similar research methods at domestic and foreign. Through carding and comparison and found that the literature at domestic and foreign have basically reached the unanimous conclusion: Fair value superior to historical cost; fair value information has value relevance; an objective of market trading prices as the basis for the fair value estimate, can improve the reliability of fair value measurement.The third part is empirical analysis. Inspect the relevance between fair value variation of financial assets and the stock value. The results showed: In 2006, 2007 and 2008, the fair value variation of financial assets and stock price are significant positive correlation in the 1 percent level. Divided by year, year 2007 and year 2008 accounting data have a better explanatory power to share price than in year 2006; divided by industry, the financial sector accounting data has a better explanatory power to share price than non-financial sector; after the division of financial assets, the two types of fair value variation of financial assets and stock price are significant positive correlation in the 1 percent level, besides, year 2007 accounting data has a better explanatory power than year 2008.The last part of the paper is research summary, policy recommendations, deficiencies, as well as prospects for the future.The main innovation lies in this paper: Firstly, research perspective innovation. The past, domestic has little financial assets the fair value of empirical research, and the fair value measurement at domestic and foreign studies did not specifically take into account the economic environment changes, this paper relies on historical backgrounds, and perspectives on innovation in research, analysis of China's use of fair value of financial assets in economic prosperity and the financial crisis environment, whether it improves the value of accounting information and stock price correlation. Secondly, research conclusion innovation. The financial sector accounting data has a better explanatory power to share price than non-financial sector, to find reasons for financial sector blamed in fair value measurement debate; the two types of fair value variation of financial assets and stock price are significant positive correlation, shows that China does not adjust the re-classification of financial assets, provision is fully justified.