The Empirical Study On The Value Relevance Difference Between Consolidated Financial Statements And Parent Company Financial Statements

Listed companies’ financial statements and disclosure are important factors of thedevelopment of capital market, but in the efficient market, the price is based on theaccounting information for stockholders’decision-making.Faced to the diverse needs of theinformation, whether from the real background of huge stock investment groups andinformation requirements, or the emphasize of disclosure on financial statements, It is ofurgent need to answer the question of the value relevance difference between consolidatedfinancial statementsand parent company financial statements.Therefore, this paper began withthe efficient market theory, combined with the reaction mechanism between the accountinginformation and stock price; build a model which contained solvency indicators and morecontrolling factors based on existing researches and through multiple regression empiricalmethod to test the difference between the value relevance of the consolidated financialstatements and parents’. Major innovations and conclusions achieved are as follows:First, unlike the pastresearches, this paper will take the statements of parent companyinto consideration; strive to analyze the relationship between financial data from parentcompany financial statements and stock price.Secondly, defined the concept of valuerelevance,described the efficient market theory,and concludedwhat reaction occurred to the stock price under information view, pricingmodels view and contract view. Then, analyzed the demanding of accounting informationfrom the perspective of investors and creditors.Finally, put forward hypothesis which took solvency indicators into consideration,;added four controlling factors which stand for corporate governance, shareholder-agentrelationship, the audit opinion and the size of the company into model building. Then, thestudy drawn conclusions like solvency index has information content; the model whichcontain profitabilityindicators, solvency indicators and controlling factors has the highestexplanatory power; consolidated financial statements has a higher value relevance than theparents’;control variables reflected different due to the model selection.