Value Relevance, Idiosyncratic Risk, and External Financing Activities

Who Benefits From IFRS Convergence in China?

Journal of Accounting Auditing & Finance ◽

10.1177/0148558x16688115 ◽

2017 ◽

Vol 34 (1) ◽

pp. 99-124 ◽

Cited By ~ 2

Author(s):

Chao Chen ◽

Edward Lee ◽

Gerald J. Lobo ◽

Jessie Zhu

Keyword(s):

Stock Market ◽

Financial Reporting ◽

Value Relevance ◽

Reporting Quality ◽

Chinese Stock Market ◽

External Financing ◽

Market Reactions ◽

Financial Reporting Standards ◽

Legal Enforcement ◽

Stock Market Reactions

We study the ex ante stock market reactions to events leading up to China’s convergence to International Financial Reporting Standards (IFRS). The literature consistently shows that the benefits of mandatory IFRS convergence are concentrated in countries with stronger legal enforcement and investor protection. Given that these institutional characteristics are weaker in China relative to more developed Western economies, whether mandating IFRS will benefit the Chinese capital market is an interesting and important, but unanswered question. We find that the Chinese stock market reacts favorably to events leading up to IFRS convergence, and this effect is more pronounced among firms with greater dependence on external capital. This result suggests the market anticipates that such firms will benefit more from IFRS convergence, possibly because of improved financial reporting quality and access to external financing. Additional tests confirm that the value relevance of accounting numbers for these firms is higher following IFRS convergence.

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The Value-Relevance of Cash Flows and Accruals: The Role of Investment Opportunities

The Accounting Review ◽

10.2308/accr.2008.83.4.997 ◽

2008 ◽

Vol 83 (4) ◽

pp. 997-1040 ◽

Cited By ~ 35

Author(s):

Krishna R. Kumar ◽

Gopal V. Krishnan

Keyword(s):

Important Determinant ◽

Value Relevance ◽

Cash Flows ◽

External Financing ◽

Investment Opportunity ◽

Accounting Measurement ◽

Investment Opportunities ◽

High Investment ◽

Cost Differentials

ABSTRACT: We examine the role of investment opportunities as a determinant of the relative importance of cash flows from operations (CFO) and accruals in firm valuation. We find that at low investment-opportunity levels, CFO value-relevance increases with investment opportunities. When investment opportunities are high, accrual value-relevance declines as investment opportunities increase. Consequently, earnings value-relevance first varies directly and then inversely with investment opportunities. We show that the increase in CFO value-relevance is consistent with cost differentials between internal and external financing causing CFO to be an increasingly important determinant of the realization of investment opportunities. The decline in accrual value-relevance at high investment-opportunity levels appears to be attributable to accounting measurement deficiencies.

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DİĞER KAPSAMLI GELİR KALEMLERİ İLE İŞLETMENİN PİYASA DEĞERİ ARASINDAKİ İLİŞKİ

Business And Management Studies An International Journal ◽

10.15295/bmij.v1i3.22 ◽

2014 ◽

Vol 1 (3) ◽

pp. 269

Author(s):

Serhan Gürkan ◽

Yasemin Köse

Keyword(s):

Financial Performance ◽

Value Relevance ◽

Net Income ◽

Comprehensive Income ◽

Income Statement ◽

Other Comprehensive Income ◽

The Difference ◽

Gains And Losses

Other comprehensive income is the difference between net income as in the Income Statement and comprehensive income, and represents the certain gains and losses of the enterprise not recognized in the Profit or Loss Account. Value relevance of other comprehensive income is under discussion and considering other comprehensive income items all together might be misleading for financial performance. In the view of such information, discussing the value relevance of each other comprehensive income item, judgements are made.

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