Value Relevance Research On Fair Value Accounting

On February 2006, Ministry of Finance issues the new accounting standards system including 1 basic standard and 38 specific guideline and requires all listed companies to implement it starting from 1st January 1, 2007. The new accounting standards system is a big adjustment to prior system. The establishment and implementation of new system meets the demand of our economic development. Meanwhile, it introduces the fair value accounting, which is more consistent with international accounting standards.This paper researches on the value relevance of fair value accounting in new accounting system and the response of capital market to it.In the Chapter One, this paper gives a summary of the motivation and meaning of the research. The second chapter introduces the academic theory development and relevant previous research. Chapter Three gives the background and development of fair value accounting in China and also summarizes of it on listed company. Based on Ohlson Model, Chapter Four does the analysis of value relevance of fair value accounting. Chapter Five summarizes the previous research result.By substituting Dependent Variable and decomposing Independent Variables, this paper takes all A-share listed companies as samples and does the multiple regressions. The results are: (1) Fair value accounting has value relevant and its coefficient strength has some relation with market situation. When the market is bull, the relationship is stronger than that when market is bear. (2) For all research periods, using fair value accounting increases profit volatility and thus increase the risk of company.In the last chapter, this paper tries to give some suggestions to the implementation of fair value accounting and forecast some further relative field for the research...