AN EMPIRICAL STUDY ON THE MOTIVATION OF CHOOSING FAIR VALUE MEASUREMENT MODEL IN INVESTMENT PROPERTY

This paper selects all non-ST listed companies in the A-share market with investment properties in the time period from 2015 to 2019 as the initial research sample and employs a binary logistic regression model to empirically examine the specific motivations of companies’ management in choosing the fair value measurement model. Our results show that the level of enterprise fair value measurement has a significant positive impact on the increase in net profit, the improvement in the ability of debt financing, the increase in total assets, the increase in the level of executive compensation and the increase in enterprise value. However, it also enhances the level of enterprise earnings management and leads to an increase in speculations by enterprise executives. In the meantime, the higher the level of fair value measurement of investment properties, the greater the fluctuations in profit, total assets and debt financing. This indicates that the adoption of the fair value measurement model for investment properties will increase the instability of profit, total assets and debt financing of enterprises. The majority of enterprises currently adopt the fair value measurement model in relation to the listed investment properties for opportunistic motives, as a way of presenting an improved quality of enterprises’ financial disclosure to both outside investors and the market overall, while catering for market developments and external regulation.