An Empirical Research On Decision Usefulness Of Consolidated Financial Statements

As the world economy is moving toward integration, China has integrated into the tide of economic globalization and capital markets internationalization, and a wave of mergers and acquisitions has been occurred in China, and then the mergers and acquisitions becomes stronger, the"Interim Provisions of the consolidated financial statements"promulgated in 1995 has been unable to meet our needs of consolidated accounting theory and practice. In February 15, 2006 China has promulgated a new"Enterprise Accounting Standards", where the implementation of"Enterprise Accounting Standards - No. 33"marked the consolidated statements convergence with the international consolidated standards. At present, there were three main theories of consolidated statements, which were the owner of theory, entity theory and the parent company theory, and the information content of the consolidated financial statements prepared by the different theories is not the same, and the decision-making value of consolidated financial statements is not the same also.CAS33 provided that we have to use the entity theory to prepare the consolidated financial statements, and using the cost method to measure Long-term equity investments, minority interests and minority entity has moved. To observe the economic consequences of CAS33, we have proposed two hypotheses. Hypothesis 1: Compared with the individual financial statements, the consolidated financial statements provided more value relevant information. Assumption 2: The consolidated financial statements prepared by entity theory are more value relevant than the consolidated financial statements prepared by parent company theory.To test the two hypotheses, we choose the market value model of Olson (Market Value Model) to study the value relevance of consolidated financial statements, but we improved this market value model of Olson. In the choice of subjects, we selected 1112 listed parent companies form most of industry after the implementation of new"Enterprise Accounting Standards"for 2007-2009 which listed in Shanghai and Shenzhen, as the research object, we draw upon the conclusion form the models were tested: the consolidated financial statements are useful and valuable compare with the individual Financial; The consolidated financial statements prepared by entity theory are more value relevant than the consolidated financial statements prepared by parent company theory. These two conclusions helped the accounting information make decision, the consolidated financial statements would reflect the summary cases of Group's financial position controlled by the parent company ,and operating results and cash flow, when stakeholders making investment decisions Should be based mainly on consolidated financial statements.