Value Relevance of Accounting Information in Chinese Listed Companies: An empirical study based on Ohlson valuation framework

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Zhang, Kai (2016) Value Relevance of Accounting Information in Chinese Listed Companies: An empirical study based on Ohlson valuation framework. [Dissertation (University of Nottingham only)]

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Abstract

This paper examines empirically how investors perceive the information content of accounting information under Chinese Accounting Standards for explaining stock prices over time. The study investigates the value relevance of accounting information in Chinese listed companies for the period from 2000 to 2015 based on Ohlson’s (1995) valuation framework. The results demonstrate that earnings and book value are value relevant to the pricing process in all years. Furthermore, the combined value relevance of earnings and book value does not have a temporal trend of either increase or decrease, but fluctuates substantially over time. The relative importance of earnings and book value in explaining stock price also fluctuates remarkably and exceeds each other alternately over time. Besides, negative earnings and large intangibles do not change the trend of fluctuations in the value relevance of earnings and book value, and the fluctuations are not correlated with the stock market sentiment.

In addition, this paper develops Ohlson’s valuation framework by adding financial leverage and operating size as independent variables into the previous price model. Results suggest that financial leverage variable has little value relevance and thus should not be included in the extended valuation model. In contrast, operating size has much value relevance incremental to the original price model, particularly in the years when value relevance of earnings and book value becomes relatively lower. The results also suggest that a firm with a larger operating size has disadvantages in the pricing process of stock shares.

Item Type: Dissertation (University of Nottingham only)
Depositing User: Zhang, Kai
Date Deposited: 09 Mar 2017 14:52
Last Modified: 19 Oct 2017 16:56
URI: https://eprints.nottingham.ac.uk/id/eprint/36373

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