Research On The Influence Of Smog On Value-relevance Of Company Accounting Information

Since the publication of the No.1 concept announcement by the US Financial Accounting Standards Board in 1978,financial accounting has been constantly evolving with the goal of decision-making usefulness.Value-relevance has become one of the most important indicators for measuring the quality of accounting information.However,due to the external identity of some accounting information users,such as the investors,they will not only consider the characteristics and operation status of the company when using accounting information,but also measure the impact of external environmental factors received by the company.Therefore,the value-relevance of accounting information will inevitably be affected by external environmental factors.At present,China's air pollution has become a major concern of the society.It has negligible impact in China's macro and microeconomic operations.Therefore,it is meaningful to empirically investigate how smog pollution affects investors' use of accounting information.This paper uses the data of A-share listed companies in China's Shanghai and Shenzhen stock markets from 2013 to 2017 and the air quality monitoring data released by China National Environmental Monitoring Centre.Based on the fixed-effects model,the impact of smog on the value-relevance of company accounting information is tested.The results of empirical analysis show that:smog will lead investors to think negatively about the company's operating conditions and pay more attention to the company's balance sheet information rather than the income statement information during valuation,which leads to the increase of value-relevance of the company's balance sheet information and decrease of the value-relevance of the income statement information.This paper further studies whether the change of investor attitude toward accounting information reflected in the change of the value-relevance of accounting information caused by smog is consistent with the real operating conditions of the company.The empirical results not only confirm that the smog does reduce the profitability of company,but also show that the company implements downward earnings management under the influence of smog.The research results of this paper not only reveal the influence of smog on the value-relevance of company accounting information,which reflects the change of investors'attitude under the influence of smog,but also confirm the damage of smog to company profitability.Therefore,it is helpful to improving enterprises'awareness of environmental protection and join the work of smog control.This paper also reveals that smog may lead to downward earnings management of companies,reminding investors to carefully evaluate the impact of smog on companies and their quality of earnings.