The Research On The Effects Of Fair Value On Investment Decision

With the promulgation of China Enterprise Accounting Standards No.39 “Fair Value Measurements” in 2014,fair value measurement has been wider use in China.But,currant literatures mainly focus on theoretical research,the available empirical data of fair value’s effects on investment decision is limited.In addition to the impacts of fair value itself on investment decision,the presentation and hierarchy of fair value may also affect investment decision.Since the lack of the above research and the disunity of their research results,it is necessary to conduct a comprehensive research on this issue.This paper primarily summarized the theories of fair value,and analysis the effects of fair value on investment decision,and weather the effects change with the presentation and hierarchy of fair value.Then took the empirical data of the financial listed companies of the A stock market from 2007 to 2014 as samples,and established model to study the relevance between fair value and stock price,so as to research the decision-usefulness of fair value,and the effects of presentation and hierarchy of fair value on investment decision.Based on the empirical research,the results can be concluded as:(1)The fair value change of tradeable financial asserts(TFA)shows a positive relevance to stock price,which provide decision-useful accounting information to investors,while the fair value change of available-for-sale financial asserts(AFS)shows irrelevance to stock price,which can not affect investment decision.The main factor that caused the irrelevance is not the fair value itself,but the presentation of the fair value.(2)The presentation of fair value can affects its decision-usefulness,the fair value change of TFA that presented in profit statement shows a positive relevance to stock price,which can affect investment decision.The fair value change of AFS that presented in stock holders’ equity statement shows irrelevance to stock price,which can not affect investment decision.The fair value change of AFS that presented both in profit statement and stock holders’ equity statement shows a positive relevance to stock price,which can affect investment decision.(3)The fair value information in level 1 and level 2 shows a positive relevance to stock price,which can affect investment decision,while the level 3 can not affect investment decision.The CAS39 has promoted the disclosure of fair value information in level 3,but failed to improve its decision-usefulness.In the end of this paper,there are some proposals being given,in order to provide some theoretical basis for the application and improvement of fair value measurements.