Changes in the Value Relevance of Accounting Information Over Time: Evidence from the Emerging Market of China
Journal of Contemporary Accounting and Economics, Forthcoming
Posted: 6 Jun 2013
Date Written: June 5, 2013
We investigate the changes in the value relevance of accounting information among Chinese firms over the past two decades, during which accounting reforms are launched to provide decision makers with increased disclosure and higher quality financial information. We also investigate the factors that differentiate firms showing significant value relevance improvement from firms showing little improvement. We find increases in the value relevance of some financial variables and decreases in others, which suggests that accounting numbers help to explain the pricing process of stock shares, although at different levels. In addition, we find that value relevance improvements are more pronounced for smaller firms, firms with lower growth rates, and those with greater asset tangibility. We also document that value relevance improvements are generally lower in an exuberant stock market. These results have implications for a variety of information users and policy makers in emerging countries that are reforming their accounting systems.
Keywords: value relevance, accounting information, firm characteristics, capital markets, emerging market, China
JEL Classification: M41
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