The Value Of Accounting Information And Earnings Lacking Timeliness

The issue discussed in this paper is the value of accounting information and earnings lacking timeliness. Many prior studies have found that accounting information convey new information to stock markets, and play an important role in the valuation of stock price. These studies have indicated that accounting information is useful. However, many studies have showed that there is a very low contemporaneous price-earnings association. This paper introduces several explanations about the low association, and lays stress on earnings lacking timeliness.The traditional revenue recognition principle states that a business should record revenue only when it is realized. So the Income Statement does not include all the profits. Therefore, there will be timing errors in the process of revenue recognition. The low contemporaneous price-earnings association is possibly due to earnings lack of timeliness. Expected future cash flows from new investments are only partially reflected in current earnings. However, these activities trigger an almost immediate revision in the market's expectation of future earnings and future cash flows, leading to immediate price changes. This paper verifies the price-earnings association, after considering the influence of earnings lacking timeliness in Chinese stock market. And we find that the association is improved saliently.Our empirical studies about the value of accounting information are far lagging behind western countries. In order to improve the researches on the relationship of Accounting information and stock price, and provide better foundation for the frame of accounting principles, we need to fully comprehend the thread and methods of the studies of the west on the relationship of Accounting information and stock price. Based on it, we can find the gap between us, and then find our own way on the studies of this field in the future. Secondly, the purpose of this paper is to have people's attention on the earnings lacking timeliness when they measure the value of accounting information.