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Value-relevance of Earnings and Book Value Over the Institutional Transition in China: The Suitability of Fair Value Accounting in This Emerging Market

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  • Qu, Xiaohui
  • Zhang, Guohua

Abstract

This paper investigates the value-relevance of earnings and book value over 20years of institutional transition in China, from 1991 to 2010, and explores the suitability of Fair Value Accounting (FVA) in the emerging capital market. In contrast to findings in the mature market, we find that the combined value-relevance of earnings and book value of listed firms in China has significantly increased with the improvement of accounting regulations and the development of market mechanisms. The incremental value-relevance of earnings keeps steady and shows a tendency to slightly decrease. Meanwhile, the incremental value-relevance of book value has significantly increased. We have not found evidence that FVA contributes to the improvement of value-relevance of earnings and book value due to IFRS convergence and the consequent application of FVA.

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  • Qu, Xiaohui & Zhang, Guohua, 2015. "Value-relevance of Earnings and Book Value Over the Institutional Transition in China: The Suitability of Fair Value Accounting in This Emerging Market," The International Journal of Accounting, Elsevier, vol. 50(2), pages 195-223.
    • Handle: RePEc:eee:accoun:v:50:y:2015:i:2:p:195-223
    DOI: 10.1016/j.intacc.2013.01.009
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    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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