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This paper examines the relative value relevance in equity valuation of two sets of accounting information of listed Chinese companies which issued the so‐called B shares to foreign investors on the Chinese stock exchanges. These firms are required to prepare two sets of financial statements: one based on China's accounting regulations (domestic GAAPs) and the other based on International Accounting Standards (IASs). The study adopted the Ohlson (1995) model and used the Davidson‐MacKinnon J‐test to assess which one of these two competing sets of accounting information is more closely associated with the share prices. The results showed that earnings and book value reported based on IASs have greater information content than those based on domestic GAAPs. The results of yearly regression analysis generally suggested that the explanatory power of these earnings and book values for share prices increased over time.
Bao et al. (Tue,) studied this question.