The Trend of Accounting Information Usefulness in China’s Stock Market

Purpose - The purpose of this study is to analyze the correlation between the usefulness of accounting information and the stock market in the Chinese stock market. Design/Methodology/Approach - This study is based on the research of Lev and Gu (2016), as well as Mun Tae-hyoung and Lee Jang-Soon (2018). Data on companies listed on the Shanghai Stock Exchange (SSE) and the Shenzhen Stock Exchange (SZSE) from 1993 to 2023 were analyzed. The relationship between net income (NI), book value (BV), and market capitalization (MV) was regressed to confirm the R² (explanatory power). Findings - The relationship between net income and market capitalization was also analyzed through the R² value, which also fluctuated over time. In 2012, net income had very strong explanatory power on market capitalization, but this relationship weakened over the following years. In particular, net income was found to have a greater impact on market capitalization in the Chinese capital market. The sharp rise in net income in 2012 was due to government policy support, while the sharp decline in 2014-2015 was attributed to market instability and increased regulation. Research Implications - These results contribute to understanding the usefulness of accounting information in the Chinese capital market, and suggest the need for further research on the role of accounting information in the context of globalization and digitalization in the future.