Study on Market Reaction and Determinants of Fair Value Accounting
|Keywords||Fair Value Loss Enduring Public Listed Companies Market reaction Event study Determinants|
Both Financial Accounting Standard Boad (FASB) and International Accounting Standard Board (IASB) are transferring from historical cost accounting to fair value accounting in making accounting standards. It is no doubt tha such a transfer has exerted a significant influence on international financial accounting theory and practice. In order to strengthen harmonization and convergence between Chinese Accounting Standards and International Financial Reporting Standards (IFRSs), Accounting Standard for Business Enterprises promulgated in 2006 by Chinese Ministry of Finance adopted fair value measurement on a large scale. Extensive application of fair value measurement has induced an intense controversy not only between academe and accounting practitioner, but also between accounting standard setters and certain supervising bodies.Against the above background, on the basis of domestic and foreign research findings,this paper uses six changes in accounting standards since June 1998 in fair value of our country for the research background, uses the data of the Loss Enduring Public Listed Companies, and the Ways of event study to test the market response and its influencing factors when the fair value principles changes. Evidences include some of the major multi-variable tests, a single variable T tests, trend analysis and multiple linear regression analysis. Study shows that:①Fair value changes in accounting standards would impact the expectation of the investors in Loss Enduring Public Listed Companies ,resulting in apparent response to the market. Specifically as follows: allowing the use of fair value measurement attribute of the promulgation of accounting standards can have a significant positive market reaction; the abolition of fair value measurement attribute of the promulgation of accounting standards can have a significant negative market reaction②When allowing the use of the promulgation of fair value measurement, he longer life the loss company has , the easier it is significant for the extraordinary rate of return; when abolishing the use of he promulgation of fair value measurement, the higher net assets losses the company has, he easier it is to obtain significant negative abnormal returns. The study also shows that when the fair value accounting standards changes, size of the loss has a significant impact on the investors’expectation, that is to say, the more the company loss, the more obvious market reaction the fair value accounting standards changes have. At last, on the basis of the normative analysis and the empirical studies, we make some policy recommendations for the development of fair value accounting in China, including: 1) Improvement of the fair value of the theoretical system;2) to strengthen enforcement of accounting standards, and improve regulatory mechanism.