Research On The Relevance Of Fair Value Measurement And Enterprise Value

Since the 1990s, the fair value measurement has been paid great attention in accounting field. Many scholars begin to research its application in many aspects. However, the financial crisis in 2007 puts the fair-value measurement in question. Fair value has been widely introduced since 2006 Corporation Accounting Standard. After several years of improvement, the Treasury issued "Accounting Standards for Enterprises No.39 -fair value measurement" in 2014, which redefines the definition of fair value, measurement requirement and disclosure framework, to promote the international harmonization and convergence. In theory, compared with the historical cost, fair value measurement can follow the market movements, feedback the changes of financial position timely, reflect the current asset values constantly, and enhance the relevance of accounting information. However, the later development of our capital market results in its relatively small size and unreasonable resources of investment, and exacerbates fluctuations of the stock market. The financial crisis may reduce the reliability of relevant data, and restrict the empirical study of the fair value measurement. Therefore, it is necessary to research the relevance of fair value measurement and enterprise value from the perspective of empirical research, to add pertinent literature and strengthen the confidence in the promotion of fair value measurement in our country.Combining with domestic and foreign literature review and theoretical analysis, this article chooses Shanghai and Shenzhen A shares’ annual report data from 2010 to 2014, and it analyzes how the fair value measurement impacts on the enterprise value empirically. In the demonstration research, based on three industry including financial sector, real estate industry and the industry whose application in fair value measurement is broader, this article focuses on financial instruments and investment property in continuous fair value measurement. Subsequently, it builds three regress models and it validates suggested three assumptions. Finally, according to regression results, this paper puts forward the corresponding advice and countermeasures. The main content of this article is as follows:Part 1 is the introduction. According to the development process of fair value measurement at home and abroad, this article introduces the research background firstly, then it summarizes its research significance. Finally it lists the research content, research ideas and research methods and its innovations and deficiencies.Part 2 is literature review. Foreign literature mainly focus on the relevance between fair value measurement and accounting information quality or the corporation value, while domestic literature mainly focus on the relevance of fair value. The reliability, application industry and accounting methods of fair value may affect the relevance of fair value measurement.Part 3 is analysis of the related theory. Under the financial report goal of useful decision, financial report begins to change from the information view to measurement view. From the concept of measurement, the fair value measurement can reflect the variations of enterprise resources and external environment timely, and enhance the relevance of accounting information. Based on the signal transmission theory and the efficient market hypothesis, fair value measurement may deliver a positive signal to the market, and can help to explain or predict prices, therefore it will affect the enterprise value. Through the analysis of the impact of fair value measurement to the enterprise value, the assets and liabilities which are measured in fair value all the time can reflect the change of enterprise value in capital market.Part 4 is research design. On the basis of the above literature review and related theory analysis, this part puts forward three research hypothesis, which are as follows:The net assets in fair value measurement correlate significantly with the enterprise value; Changes in fair value gains and losses correlate significantly with the enterprise value; Changes in fair value included in other comprehensive income correlate significantly with the enterprise value. According to the sample data, this paper build the regression model in three industry including financial sector, real estate industry and industry, then it studies how the initial and subsequent measurement of the fair value impacts on the enterprise value.Part 5 is regress result and analysis. On the basis of above regression model, this part starts to make description of the statistics analysis which cover main explained variable (market value per share) and explanatory variables (the net assets in fair value measurement, Changes in fair value gains and losses, Changes in fair value included in other comprehensive income), in order to summarize distribution feature of main variables in different industries. Then regression analysis is to be done by SPSS, the relevant research conclusions are as follows:No matter which industry, the net assets in fair value measurement correlate significantly with the enterprise value; Only in the real estate industry, Changes in fair value gains and losses correlate significantly with the enterprise value; Only in the industry, Changes in fair value included in other comprehensive income correlate significantly with the enterprise value.Part 6 is the conclusions and recommendations. According to relevance between the net assets in fair value measurement and enterprise value, enterprise management should enlarge the application scope of fair value measurement appropriately. According to the relevance between subsequent measurement of the fair value and enterprise value, investors may worry about the reliability of the subsequent measurement of fair value, so it is necessary to improve its reliability from external market environment, the valuation techniques, improvement of the information disclosure and training on financial staff. Meanwhile it benefits the stability of the stock prices to lead investors to understand the application of fair value measurement.