Securities law transition and value relevance: Evidence from China

This research investigates the impact of securities law transition on the value relevance of earnings and book value. This research adopts the Ohlson (1995) model to measure the value relevance. Using the panel data of 2,116 Chinese listed companies from 2015 to 2022, we analyze the impact of the Chinese securities law amendment (which happened in 2019) on the value relevance. The results reveal that the value relevance of earnings increased after the securities law amendment, while the value relevance of the book value decreased during the same period. These results indicate that under a stricter securities law, investors put more emphasis on the earnings than the book value. This research contributes to existing literature (Choi et al., 2018; Oz & Yelkenci, 2018) by providing insights into the interplay between the legal environment and market reaction to accounting information. These insights aid stakeholders in comprehending the effects of securities law transition on value relevance. This research also provides empirical evidence to the lawmakers and aids in formulating more effective regulatory strategies. By grounding regulatory decisions in empirical findings, lawmakers can ensure that regulations are evidence-based and aligned with market dynamics.