Research On The Impacts Of The Characteristics Of Capital Market To Value Relevance Of Accounting Information

The new"Accounting Standard for Business Enterprises"has been implemented since 2006. The criteria on the accounting system of Mainland China has converged gradually and been almost equivalent to that of the European Union,Hong Kong and other regions in the world. However, what ministry of finance of China mostly concerns is the market responses to the new accounting standard. Therefore, the gist of this study is to further examine the impacts of the new standard, and find out the cruxes so as to ameliorate it. This paper takes information disclosure and information interpretation as a starting point, and analyzes the impacts of the new accounting standard through the empirical and normative researches. The results provide the possibility of ameliorating the standard.After the literature review, in order to test the effects of the new standard, this paper takes the efficiency of the capital market in China,information transparency and investor sentiment into account. The paper mainly includes the following contents:①According to the literature review, the definitions of market characteristics and value relevance of accounting information are provided. Moreover, people start to concentrate on the impact of macro factors, which is also the perspective of this paper.②The theoretical foundation of this paper is introduced as the basis of the empirical analysis, which mainly includes: efficient market hypothesis,decision usefulness view,asymmetric information theory,behavioral finance and especially introduces the investor sentiment, such as overconfidence,mental accounting and herd behavior.③I analyze the correlation between accounting information and the stock prices via economic consequenlism and also investigate impacts of information transparency and investor sentiment on value relevance of accounting information. Additionally, I also introduce the gauges of information transparency and investor sentiment, where I take the Shenzhen Stock Exchange grading to represent information transparency, and annual turnover to represent investor sentiment. It provides the theoretical foundations for the empirical study below.④The empirical analysis is conduct in the two sample periods of 2005-2006 and 2008-2010, and only focuses on listed companies. The price model is improved to fit to this case. I do the regression analysis on this two-period data. In order to examine the effects of information transparency and investor sentiment on value relevance of accounting information, I compare the R-square and coefficients of the covariates horizontally and vertically.⑤Through the analysis of the results, it can conclude that information transparency is positively correlated with value relevance of accounting information, while investor sentiment is negatively correlated with it. Furthermore, the suggestions are made from the points of views of the government and the investor, which provides the possibility of ameliorating the standard.The innovations of this paper are:1. It is the first time to explore the influences of information transparency and investor sentiment on value relevance of accounting information from the perspectives of information disclosure and information interpretation. The results show that the more the information is transparent, the more the sentiment of investors is stable, the higher value relevance of accounting information is.2. I study the correlation between information transparency and value relevance of accounting information, and also the correlation between investor sentiment and value relevance of accounting information. I take the Shenzhen Stock Exchange grading to represent information transparency which is divided into several groups from high to low value, and examine the effect of information transparency on value relevance of accounting information. I also take annual turnover to represent investor sentiment to testify its impact.