How Does Fair Value Measurement Affect Corporate Financing Constraints? Evidence From China

Abstract

Using data from A-share listed companies in China from 2014 to 2021, this study investigates the impact of fair value measurement on corporate financing constraints. The findings indicate that fair value measurement significantly alleviates these constraints. Additionally, the study identifies information asymmetry and executive compensation incentives as key mechanisms through which fair value measurement reduces financing constraints. Furthermore, it explores how ownership structure, industry competition and audit opinion type moderate this relationship. The analysis reveals that fair value measurement is more effective in non-state-owned enterprises, companies in highly competitive industries and those receiving unqualified audit opinions. Overall, our findings offer innovative theoretical and practical insights into understanding and leveraging the impact of fair value measurement on corporate financing constraints.