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

See all articles by Kevin C. K. Lam

Kevin C. K. Lam

Hang Seng Management College; The Chinese University of Hong Kong (CUHK) - School of Accountancy

Heibatollah Sami

Lehigh University

Haiyan Zhou

University of Texas - Pan American

Date Written: June 5, 2013

Abstract

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

Suggested Citation

Lam, Kevin C. K. and Sami, Heibatollah and Zhou, Haiyan, Changes in the Value Relevance of Accounting Information Over Time: Evidence from the Emerging Market of China (June 5, 2013). Journal of Contemporary Accounting and Economics, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2275077

Kevin C. K. Lam (Contact Author)

Hang Seng Management College ( email )

Hang Shin Link
Siu Lek Yuen
Shatin, Hong Kong
China

The Chinese University of Hong Kong (CUHK) - School of Accountancy ( email )

Shatin, N.T.
Hong Kong

Heibatollah Sami

Lehigh University ( email )

Bethlehem, PA 18015
United States
610-758-3407 (Phone)

Haiyan Zhou

University of Texas - Pan American ( email )

1201 West University Drive
Edinburg, TX 78539
United States
956-381-3334 (Phone)
956-381-2407 (Fax)

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