Financial Statement Analysis: Evidence from Chinese Firms

This paper conducts a fundamental analysis of Chinese firms based on accounting numbers in their financial statements. The sample consists of 2,164 Chinese firms listed on Shanghai and Shenzhen Stock Exchanges during the period 2001 to 2013. We use nine fundamental signals and specify a benchmark model and an augmented model. We regress future excess returns on the signals and find that they are associated with excess returns; five of the signals are negatively associated with excess returns, while the other four are positively associated with excess returns. Further analysis suggests that our finding is mainly driven by state-owned firms.