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The Analyze on Relevance between the Fair Value and the Stock Price of the Banking Lists

Author: ZhangNuo
Tutor: LiRiZuo
School: Dongbei University of Finance
Course: Accounting
Keywords: Fair Value The Market Efficiency The Ohlson Residual Income Value Model Mann-Whitney non-parametric test
CLC: F832.3
Type: Master's thesis
Year: 2010
Downloads: 193
Quote: 0
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Abstract

As the new accounting principle published and applied, China began a totally, conditional use of fair value measurement times. From 2006 to 2009, the lists in china experienced the translation of accounting principle, and the Chinese economy also suffered the Sub-prime Lending Crisis. As the crisis develops, how to apply and disclose the fair value measurement has ever been a hot topic in the capital market.There has been a lot researches on the relationship between the capital market and the accounting information. So the relevance between the fair value and the stock price is not a new topic. For the research on the relevance between the fair value and the stock price, there are some foreign studied from 90s of 20 century, and recently many civil scholars has studied it too. However the most civil researches were applying the Ohlson Model and Value Relevance Model, choosing the whole capital market, data without distinguishing the industrials as research samples, and using one year data. Some researches came to the conclusion that there was no relevance between the fair value and the stock price. Such conclusion seems to be worth to be weighted, for fair value measurement is fully questioned in the world since the Sub-prime Lending Crisis. Thus, the reason why I chose the relevance between the fair value and the stock price as my topic is the suspicion of the conclusion of no relevance from the domestic published paper. The research on it is beneficial to the understanding of.how the fair value measurement affects the financial report and the investor, to the more reasonable application of fair value, and to the revision and improvement of the accounting principle.According to the market efficiency, this article adopts the Value Relevance Model and the Mann-Whitney non-parametric test to analyze the relevance between the fair value and stock price in different markets, based on the samples of the China banking lists financial reports from 2006 to 2009. The research conclusions are:there is relevance between the fair value through earnings and the stock price in the efficient market; the Ohlson residual income value model and Value Relevance Model may not be suitable to the issue the paper studies; there is no relevance between the fair value and the stock price in the inefficient market; and we should be prudent for the fair value application.The innovations of the article are:choose the typical banking financial data from the angle of the situation of the China capital market; analyze and test the shortcomings of the domestic published paper; analyze the applicability and defects of the Ohlson model; and adopt different measure dealing with the issue in different conditions according to the market efficiency.In order to avoid the effect of industry differences, I select the banking industry as the research object, for its wide use of fair value, representative data and typical industry. However, the retrievable data amount is not large and the conclusion may be able to describe the relevance between the fair value and the banking stock price of this period, for the limitation of the China capital market scale, the current development, and the small amount of the banking lists. Therefore, the representative of the conclusion may cannot describe the totally market well. On the other side, although the model variables can explain the relationship between the variables and the stock price at certain degree, the research may still omit some better variables due to the lack of the economic metrology knowledge and the limited ability.The writing process is not only the research on the relevance between the fair value and the stock price, but also the process of learning and understanding the fair value. I deeply realize the fair value should be studied and applied to deal with the Chinese practical problems according to Chinese condition.

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CLC: > Economic > Fiscal, monetary > Finance, banking > China's financial,banking > Financial organizations, banks
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