Empirical Research On Information Content Of Comprehensive Income Of The Listed Companies In China

In June2009, the National Treasury in China published Explain of AccountingStandard for Business Enterprises NO.3. This standard advanced the meaning ofother comprehensive income and required all the listed companies to disclose theitems of comprehensive income and other comprehensive income in their financialstatements. The information content of comprehensive income has been a hot topicin recent years after presenting comprehensive income. As one of the qualitativecharacteristics of accounting information, relevance is an important criterion tomeasure whether accounting information is useful. But relevance of accountinginformation not only embodies its value relevance,but also embodies its predictableability. So if comprehensive income can forecast companies’ future operatingperformance better than net income’s，it will prove the information content ofcomprehensive income is more than net income from the other angle except its valuerelevance.Many scholars in China only studied the comprehensive income’s valuerelevance under the premise that the capital market is efficient, then they comparedthe results to net income’s value relevance in order to reflect the information contentof comprehensive income. Although this method is reasonable in some degree, itlacks consideration of capital market and investors in China. And value relevancecan’t explain whether comprehensive income has the decision relevance from theside of the predictable ability of accounting information. Based on the above analysis,this research used price model to study comprehensive income’s value relevance andalso chose the next period’s operating cash flow and net income to build short-period prediction model on the basic of analysing fore scholars’ studies in order to studycomprehensive income’s predictable ability. Then this research compared the resultsbefore to net income’s. So this study can prove whether comprehensive income hashigher information content than net income from many sides.This study chose the relevant financial data from the year2009to the year2012as research sample. And through the analysis of the regression results, the researchgot the following conclusions:(1) Comprehensive income has value relevance, butit’s lower than net income’s. This result indicates that the users of financialstatements focus on net income information the more so far, traditional accountingincome is still the more important foundation to make investing decision.(2)Comprehensive income can predict future operating performance and it’s somewhatbetter than net income. This result shows that comprehensive income has betterpredictive value and comprehensive income information has better relevance thannet income.