Accounting standards and quality of earnings information: evidence from an emerging economy

Abstract

Among global fund managers and investors, the reliability of accounting data in emerging markets can be a major concern because some of the firms in their portfolio may be disseminating information that lacks compliance with generally accepted accounting standards. This study investigates the changes in the value relevance of earnings following the implementation of new national accounting standards in an emerging economy using China as an example. Specifically, this research analyses the difference in value relevance changes between two market segments. The results show that implementation of specific national standards has a positive effect on the perceived value of the accounting information. Such a perception is reflected in the increased value relevance of the earnings.