The usefulness of earnings and book value for equity valuation in emerging capital markets : evidence from listed companies in the people's republic of China

Ben Hsien BAO, Lynne CHOW

    Research output: Journal PublicationsJournal Article (refereed)Researchpeer-review

    66 Citations (Scopus)

    Abstract

    This paper examines the relative value relevance in equity valuation of two sets of accounting information of listed Chinese companies which issued the so-called B shares to foreign investors on the Chinese stock exchanges. These firms are required to prepare two sets of financial statements: one based on China's accounting regulations (domestic GAAPs) and the other based on International Accounting Standards (IASs). The study adopted the Ohlson (1995) model and used the Davidson-MacKinnon J-test to assess which one of these two competing sets of accounting information is more closely associated with the share prices. The results showed that earnings and book value reported based on IASs have greater information content than those based on domestic GAAPs. The results of yearly regression analysis generally suggested that the explanatory power of these earnings and book values for share prices increased over time.
    Original languageEnglish
    Pages (from-to)85-104
    Number of pages20
    JournalJournal of International Financial Management and Accounting
    Volume10
    Issue number2
    DOIs
    Publication statusPublished - 1 Jan 1999

    Fingerprint

    Listed companies
    Accounting information
    Equity valuation
    Book value
    Usefulness
    Emerging capital markets
    Share prices
    International accounting standards
    China
    Foreign investors
    Information content
    Regression analysis
    Ohlson model
    Financial statements
    Stock exchange
    Accounting regulation
    Value relevance

    Cite this

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    title = "The usefulness of earnings and book value for equity valuation in emerging capital markets : evidence from listed companies in the people's republic of China",
    abstract = "This paper examines the relative value relevance in equity valuation of two sets of accounting information of listed Chinese companies which issued the so-called B shares to foreign investors on the Chinese stock exchanges. These firms are required to prepare two sets of financial statements: one based on China's accounting regulations (domestic GAAPs) and the other based on International Accounting Standards (IASs). The study adopted the Ohlson (1995) model and used the Davidson-MacKinnon J-test to assess which one of these two competing sets of accounting information is more closely associated with the share prices. The results showed that earnings and book value reported based on IASs have greater information content than those based on domestic GAAPs. The results of yearly regression analysis generally suggested that the explanatory power of these earnings and book values for share prices increased over time.",
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    The usefulness of earnings and book value for equity valuation in emerging capital markets : evidence from listed companies in the people's republic of China. / BAO, Ben Hsien; CHOW, Lynne.

    In: Journal of International Financial Management and Accounting, Vol. 10, No. 2, 01.01.1999, p. 85-104.

    Research output: Journal PublicationsJournal Article (refereed)Researchpeer-review

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    AB - This paper examines the relative value relevance in equity valuation of two sets of accounting information of listed Chinese companies which issued the so-called B shares to foreign investors on the Chinese stock exchanges. These firms are required to prepare two sets of financial statements: one based on China's accounting regulations (domestic GAAPs) and the other based on International Accounting Standards (IASs). The study adopted the Ohlson (1995) model and used the Davidson-MacKinnon J-test to assess which one of these two competing sets of accounting information is more closely associated with the share prices. The results showed that earnings and book value reported based on IASs have greater information content than those based on domestic GAAPs. The results of yearly regression analysis generally suggested that the explanatory power of these earnings and book values for share prices increased over time.

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