Purpose: The purpose of this article is to study whether there exists natural relationship
between fair value and corporate external market. A series of special phenomenon in the
application of fair value arouses our research interests, which present evidences on how
competition affects the correlation of fair value information.
Design/methodology/approach: this thesis chooses fair value changes gains and losses and
calculate the ratio of DFVPSit as the alternative variable of the fair value. In order to effectively
inspect the mutual influence between the degree of industry competition and the value
relevance of fair value, and reduce the impact of multi-collinearity, we built a regression model
on the hypothesis, which supposes that if other conditions are the same, the fair value
information has greater value relevance if the degree of the industry competition is greater. To
test the hypothesis, we use the comparison of the DFVPSit coefficient absolute value to judge
the value relevance of fair value information, and the greater the absolute value is, the higher
relevance between the changes in fair value per share profits and losses with the stock prices.
Findings: The higher the degree of competition in the industry is, the more fair value
information relevance is. Also, there are evidences representing that fair value information
often presents negative correlation with the stock price.Originality/value: The main contribution of the article is to show that not only need we make
the formulation and implementation of the high quality of fair value accounting standards to
suit for both the national conditions and international practice, but also need we further to
improve the company's external governance mechanism to promote fair value’s information
correlation.
