The Impact Of Large Impairment On The Value Relevance Of Financial Statements

By using data of Chinese listed firms from 2011-2014, this article attempts to explore the consequences of value-relevance of financial statements posed by large impairments. The results show that, after the large impairments, the value-relevance drops dramatically. Further analysis finds that large impairments driven by short-term asset can pose a tremendous influence to the value-relevance. Considering the special regulations about ownership, district development and “special target”,the samples are being classified into state-owned enterprise and private-owned enterprise, East West and central enterprise and loss and profit enterprise. The results show that value-relevance of financial statements drops dramatically in private-owned enterprise, central enterprise and negative profit prior year enterprise, but no evidence shows the same result in their counterparts.