Value Relevance and Shareholding Structure in Emerging Capital Markets

The market valuation theory has been widely tested and accepted in most developed markets. Does it hold in emerging markets such as in China? The central objective of this study is to address this issue. In particular, the study is focused on two tasks: 1) to investigate the value relevance of accounting figures in the unique context of China; 2) to examine the effects of different types of shareholding on the market value of listed companies. The results seem to suggest that accounting information contained in the Chinese financial reports, e.g. book value and net profits, is playing a significant role in explaining the market value in China s stock market, indicating that the market valuation theory can be applied not only to developed markets, but also to the emerging ones such as in China. As for the relationship between ownership structure and market value, the results of this study seem to lead one to believe that both state and legal-person shareholdings have significant impacts on the market value, however their effects appear to be different.