A Study On Volatility Of Comprehensive Income

<The basic standard of accounting standard for business enterprises>was issued by the Ministry of Finance PRC in February,2006, in which the Asset-liability view was as one of the basic theory for the first time instead of the Revenue-Expense view. The Other Comprehensive Income was introduced in<Accounting Standards Interpretation for Business Enterprises:NO.3> and Ministry of Finance PRC:<The notice about annual report in2009based on accounting standard by listed companies and non-listed companies>, and the Ministry of Finance requires the enterprises to disclose the comprehensive income and the other comprehensive income in the income statement and statement of owner’s equity, more specific information about the other comprehensive in notes to financial statements, and the format and content of the other comprehensive income. However in real terms, there are many problems in the disclosure of the other comprehensive income.Although it is not long since the first used of the comprehensive income in China, and there is many problems on the disclosure of it, many scholars found that the comprehensive income does have incremental Information content to net income. As a present of fair value, whether the comprehensive income volatile the income and whether the incremental volatility of comprehensive income over the volatility of net income capitalized into share prices are the issues we care about.Hence, based on the above mentioned, after reading and studying the present abroad and domestic papers, I use three volatility index which are often used in the study of comprehensive income to argue that since the comprehensive income introduced to our country, whether present evidence on incremental information to net income in a perspective of volatility using the data of2009-2012, and we analysis the change of it so that we can acknowledge the effect of<The basic standard of accounting standard for business enterprises> and present some advice to relevant scholars and principle makers. The paper consists of five parts:I. Introduction. This part shows the background, significance of this paper, illustrates the structure and framework, discusses the possible innovations and limits.II. Literature review. According to the studies about abroad and domestic on the comprehensive income and accounting information quality evaluation, summarizes and comments the existing literatures.III. The theoretical analysis. This part we describe the meaning and characteristics of comprehensive income, content and theories related. We also introduce the content of volatility in this part.IV. The Empirical Study. Firstly, explain the descriptive statistics, analysis the problems about disclosure of the comprehensive income. Secondly, collect the data from quarterly reports and annual reports of A-shared companies of Shanghai Stock Market and Shenzhen Stock Market from2009to2012. Then, hypotheses three hypothesis, using models which was established by foreign scholars to test the information content to the market through regression.V. Conclusion and enlightenment. Summarize the empirical conclusions and make the explanation of the results and provide advices on how to improve the disclosure quality of the comprehensive income information.The possible Innovation of this paper is:Firstly, the perspective is different from other scholars in our country, we choose another angle to argue that whether comprehensive is more value-relevant than the net income, and then we can find out the effect of comprehensive income since it was introduced in our country.Secondly, find an indirect way to measure the other comprehensive income. Most research which were studying the incremental value-relevant of comprehensive income and price often chose the other comprehensive income and its content to be independent variable. But in this study, we find an indirect way to measure the incremental value-relevant of comprehensive income.Thirdly, in attention to make the volatility more accurate, we collect quarterly report and annual report instead of single annual report to measure net income volatility, comprehensive income volatility and comprehensive incremental volatility. In addition, we also established annual data to find out the change of comprehensive incremental volatility information content, and try to explain the reasons.