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Does Market Welcome the International Convergence of Fair Value Standard in China?

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  • Dehong Wang
  • Jianbo Song
  • Yue Zhang

Abstract

This paper studies the international convergence of fair value measurement standard and examines market reactions towards the emergence of the standard in China. Through comparing the fair value measurement standard between IFRS 13 and newest Chinese accounting standard CAS 39, we find that CAS 39 is on the way of international convergence towards IFRS 13. Through examining market reactions to CAS 39, we find that market has significantly positive reactions to the draft version exposure, official announcement, and enforcement of CAS 39. Moreover, we find that investors have different attitudes to the applications of CAS 39 in financial and non-financial industries. Investors consistently support CAS 39 in non-financial industries. However, in financial industries, investors react positively in the draft version exposure of CAS 39, but negatively in the official announcement and enforcement of CAS 39. We believe that investors worry about the application of CAS 39 in Chinese financial industries.

Suggested Citation

  • Dehong Wang & Jianbo Song & Yue Zhang, 2017. "Does Market Welcome the International Convergence of Fair Value Standard in China?," Applied Finance and Accounting, Redfame publishing, vol. 3(2), pages 1-13, August.
    • Handle: RePEc:rfa:afajnl:v:3:y:2017:i:2:p:1-13
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    References listed on IDEAS

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    1. Cornett, Marcia Millon & Rezaee, Zabihollah & Tehranian, Hassan, 1996. "An investigation of capital market reactions to pronouncements on fair value accounting," Journal of Accounting and Economics, Elsevier, vol. 22(1-3), pages 119-154, October.
    2. Palea, Vera, 2013. "Fair Value Accounting and Its Usefulness to Financial Statement Users," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201327, University of Turin.
    3. Nicky J. Welton & Howard H. Z. Thom, 2015. "Value of Information," Medical Decision Making, , vol. 35(5), pages 564-566, July.
    4. Fama, Eugene F, 1991. "Efficient Capital Markets: II," Journal of Finance, American Finance Association, vol. 46(5), pages 1575-1617, December.
    5. Vera Palea, 2014. "Fair value accounting and its usefulness to financial statement users," Journal of Financial Reporting and Accounting, Emerald Group Publishing Limited, vol. 12(2), pages 102-116, September.
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    Cited by:

    1. Rui Ye & Saeed Heravi & Jason Xiao, 2024. "Market Institutions, Fair Value, and Financial Analyst Forecast Accuracy," Abacus, Accounting Foundation, University of Sydney, vol. 60(1), pages 130-171, March.

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    More about this item

    Keywords

    market reaction; international convergence; fair value measurement; IFRS;
    All these keywords.

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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