The Relativity Of Fair Value And Accounting Conservatism

Fair value has always been a hot issue of the International Accounting, and it has not only got more attention from the accounting profession as the financial crisis becomes more and more fierce, but caused extensive discussion out of the profession as well.Focusing on the application of fair value in China, this dissertation studies the influence it has on the quality of accounting information in capital market during 1998-2007, from the view of accounting conservatism.Firstly, the dissertation reviews the history of fair value's application in China, according to which to divide the research period into three phases. Secondly, the dissertation introduces the concept, origin and development of accounting conservatism, then sums up the definition, classification, models and empirical evidences in the empirical literature.Based on above, this dissertation selects A-share companies listed in Shanghai and Shenzhen Stock Exchange as observations and adopts Basu's earnings/stock returns relation model to study two major issues: one is the existence of conditional conservatism of listed companies in China, and the other is the change of the conservatism along with the flux of fair value's application, or rather, the influence of such application have on accounting conservatism.The empirical results in the dissertation indicate that:(1) In general, accounting earnings of listed companies show conditional conservatism during the period of 1998-2007;(2) In the three phases we define-introducing period(1998-2000), obviating period(2001-2006) and reapplication period(2007)-accounting conservatism varies in extent and shows an upward trend;(3) When observations in the year 2007 are tested alone, the dissertation finds out companies with fair value represent more conservative in accounting earnings than companies without fair value.