Effect of Fair Value Measurement Model of Investment Property on Company Financial Risks in China

Abstract

With the economic growth and rising house prices, the investment property measured at historical value obviously cannot reflect the real value and the fair value measurement model becomes more widespread. This article selects the listed companies owning the investment property and using the fair value measurement method from 2014 to 2018 in Chinese A-Share stock market as the research samples. This paper tests the correlation of fair value changes and corporation financial risk. It can be concluded that: (1) Application of fair value measurement model to measure investment property will reduce the financial risk of an enterprise or enterprises. (2) There is a negative correlation between investment property per share measured at fair value and financial risk. (3) The fair value measurement model of investment property has different impact on state-owned enterprises and private enterprises. Based on the above findings, this paper puts forward recommendations for the fair value measurement model of investment property.