An Emprical Research On Other Comprehensive Income And Company Value

In2009,《The Accounting Standards Enterprises for Business: No.3》 waspromulgated by China’s Ministry of Finance, and required for the first time that “theOther Comprehensive Income(OCI)"and "Comprehensive Income Amount(CI)"must bepresented in the profit statement and disclosed in detail at the same time.《TheAccounting Standards Enterprises for Business: No.3》introduced the theory of CI intoChina’s system of accounting standards which tends to the international accountingstandards. However, whether this CI theory is appropriate for China’s capital market ornot? Whether presentation of CI and OCI can improve the transparency of accountinginformation, increase the accounting value of the information, and impact the quality ofaccounting information of listed companies? The experts in China accounting academicare needed to study and discuss deeply.This paper combined the normative research and empirical research together.Normative research mainly includes the research background and significance, researchideas and methods, and research innovations and so on, on the basis of retrospect of theresearch at home and abroad, the relevance concept of other comprehensive income andcomprehensive income concept is defined, and introduce the cost of assets and liabilitiesview and income theory. Empirical studies include descriptive statistics, correlationanalysis and multiple linear regression analysis. this paper select the data of financialstatements(2007to2009) under the new accounting standards from Shanghai A-sharelisted companies and investigate the value relevance of net income, other comprehensiveincome and comprehensive income. Stock prices as explanatory variables, select the netincome per share, the consolidated income per share and earnings per share of othercomprehensive income as an explanatory variable, select the net assets per share and theproportion of outstanding shares as control variables.Through research，we draw the following conclusions: First, net income andcomprehensive income both have the value relevance, but the value-relevance of comprehensive income is not stronger than that of net income, namely, the investorsstill pay more attention to the traditional earnings and comprehensive income conceptneeds to be improved.The innovation of this paper is mainly manifested in the following aspects:Firstly, In2009,《The Accounting Standards Enterprises for Business: No.3》waspromulgated by China’s Ministry of Finance, and required for the first time that “theOther Comprehensive Income(OCI)"and "Comprehensive Income Amount(CI)"must bepresented in the profit statement and disclosed in detail at the same time. For the firsttime, this paper carried on the empirical research of the other comprehensive income. But,the research of the other comprehensive income has stayed in the aspect of the theory andfocused on the definition and the presentation of the other comprehensive income items.Secondly, this paper used the price model to examine the value relevance of othercomprehensive income. In the price model, the stock price used the annual reportdisclosure of average price and tried to rule out other factors, because they interfere withthe stock price. In order to make the conclusion more reliable,the author introduced thecontrol varies to test the value relevance.Thirdly,“Gains and losses directly in equity’ is embodied in the owner’s rights ofchanges.《The Accounting Standards Enterprises for Business: No.3》 began on June25,2009and the income statemen increased the items of the other comprehensiveincome.At the same time, we change gains and losses directly in equity into othercomprehensive income and they are presented in the income statement. This paper selectsthe datas of the three years from2009to2011.We study the value relevance of the othercomprehensive income more timely.The theory of CI is a relatively new concept in China, whether investors or publiccompanies ‘s awareness of it are relatively limited, and so some help can be given fortheir understanding of OCI and CI, but there are still many limitations. Based on theanalysis of the empirical results with the current capital market development stage andstatus. This paper provide suggestions that how to further improve the disclosure of comprehensive income and other comprehensive income, on the current capital marketenvironment, in order to enhance investors’ understanding about other comprehensive,reinforce the usefulness of financial information based decision-making, better service toour country’s capital market development.