An Empirical Study On The Correlation Between Other Comprehensive Returns And Disclosure Value

In June11th2009, the ministry of finance of the People’s Republic of China in its released "Interpretation No.3of the Accounting Standards for Business Enterprises" first introduced the concept of Other Comprehensive Income, and required the enterprises to add the items of "Other Comprehensive Income" and "Total Comprehensive Income" below the item of "Earnings per Share" in the Income Statement. In December24th2009, the ministry of finance also released Finance and Accounting [2009]:No.16. Combined with the Interpretation No.3which made requirements of adjusting the Income Statement format, No.16also made specific requirements about the disclosure of Other Comprehensive Income in the notes to the financial statements. From the year2009, the China listed companies began to present and disclose the items of Other Comprehensive Income.Based on the above research background, this paper first reviewed the domestic and international literatures from the perspectives of accounting earning value relevance and comprehensive income earning value relevance. Then the connation and content of Other Comprehensive Income are discussed, and the existing problems of disclosing and presenting Other Comprehensive Income in the2009-2011annual reports have been analyzed. Finally, based on the data of2007-2011China A-share listed companies’annual reports, this paper used pricing model, relative association studies and incremental association studies to examine the explanation ability of Comprehensive Income on share price relative to the explanation ability of net income on share price. The empirical research result shows that the value relevance of comprehensive income is significantly lower than net income, and the other comprehensive income does not have value relevance.