Research On Improvement Of Regional Institutional Environment And Value Relevance Of Fair Value

This dissertation focuses on the hot dispute of the value relevance of fair value accounting in China since it has been introduced into the new GAAP by the Financial Ministry in 2006.As we know,many accounting researchers have questioned whether the accounting information measured by the fair value has the higher level of both accountability and relevance in order to further find the institutional determinants of using the fair value accounting.It is well known that the institutional environment is the key issue to affect the value relevance of fair value accounting.Therefore,the evolution of the institutional environment has a profound effect on the accounting behavior.Compared with the developed western countries,China has significant difference in many aspects,which provide us a good chance to discuss the dispute of the value relevance of fair value accounting and make it more complex and challenged than in the developed countries.In 1998,China has first introduced the fair value accounting,and then abolished it.In 2006,the fair value accounting has been introduced again in China GAAP with the effect of magnificent change in the institutional environment during a decade in recent China.These changes include the marketization of its depth and width,the improvement of the fairness of law,and the adaptability of the role of government,both in macro-economic and regional level and in micro-economic level,which have a profound effect in accounting regulation and practice.It is the evolution of institutional environment that the fair value accounting has been adopted by the firms because it is a necessity to satisfy the gap between the general use of derivative financial instruments and the demand of the value relevance of accounting information.Therefore,this dissertation has tried to dig into the relationship between the regional institutional environment and the accounting behavior in an emerging economy and further to find out how the institutional environment affects the value relevance of accounting information.On the methodology,based on the model of Ohlson(1995)and Feltham and Ohlson(1995),I have collected the stock prices and the data on the assets measured by the fair value of the A share listed firms during 2007 from 2009.Then I have selected three variables to capture the change of institutional environment,the Index of marketization,law enforcement and government intervention developed by Fan and Wang(2011).Based on these data and model,I have investigated the effect of institutional environment on the value relevance of fair value accounting information.This dissertation includes seven parts arranged as follows.The background,research questions,motivation and literature review and theory are listed in the first,second and third part.In the fourth to sixth part,I have respectively answered the questions on how marketization,law enforcement and government intervention affect the value relevance of fair value accounting.Last part is the conclusion.To be specific,the research conclusion of this dissertation mainly has three points:1.The improvement of regional marketizaton increased value relevance of net financial assets in fair value measurement.2.The improvement of regional legislation increased value relevance of net financial assets in fair value measurement to some extent.3.The weakening of regional government intervention increased value relevance of net financial assets in fair value measurement.The contribution of this dissertation mainly is to analyze the effects of regional institutional environment improvement on value relevance of fair value systematically from three aspects in empirical test.