Value relevance of accounting information in China pre‐ and post‐2001 accounting reforms

Keryn Chalmers (Monash University, Caulfield East, Australia)
Farshid Navissi (Monash University, Caulfield East, Australia)
Wen Qu (Monash University, Caulfield East, Australia)

Managerial Auditing Journal

ISSN: 0268-6902

Publication date: 7 September 2010



This paper aims to investigate whether the accounting reform in China has improved the relevance of China's accounting information. It seeks to investigate the association between earnings and book value of equity to share returns before and after the introduction of the Accounting System for Business Enterprises (ASBE) in 2001 for A‐ and A&B‐share firms.


The paper employs the return regression model. The pre‐ASBE period is designated as 1997 through to 2000, and the post‐ASBE period is designated as 2002 through to 2004. All firms listed on the Chinese stock market during the investigation period constitute the sample.


It is found that accounting information better explains share returns for both A‐share firms and A&B‐share firms in the post‐ASBE period. The paper also finds that the book value of equity for A&B‐share firms is incrementally value relevant to that of A‐share firms in the post‐ASBE period.

Research limitations/implications

Further studies will contribute to understanding how governance mechanisms and liquidity influence the association between accounting information and share returns in the Chinese A‐share market.

Practical implications

The findings provide empirical evidence regarding the relevance of accounting information in emerging markets.


The paper contributes to the extant value relevance literature by investigating time periods surrounding the issue of ASBE in 2001 in the Chinese stock market.



Chalmers, K., Navissi, F. and Qu, W. (2010), "Value relevance of accounting information in China pre‐ and post‐2001 accounting reforms", Managerial Auditing Journal, Vol. 25 No. 8, pp. 792-813.

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