The value-relevance of fundamentals: Evidence from listed agribusiness firms in China

This research aims at assessing the value relevance of fundamentals in listed agribusiness firms in China. Due to the particularity of the agricultural industry, the quality of the fundamentals draws concern from investors and regulators, who have been questioning the trustworthiness of the fundamentals. In this paper, correlation between the accumulative abnormal returns and the unanticipated fundamentals is examined, and the Market Adjusted Return model is used for calculation of the accumulative abnormal returns and the Naïve model for calculation of the unanticipated fundamentals. Our evidence indicates that the fundamentals of the listed agribusiness firms in China have weak value relevance with very low R2 value. This paper also looks into causes for the weak value relevance of the fundamentals by analyzing the current Chinese accounting rules and the market efficiency and offers suggestions for further reform and improvement.