In accounting research for the past three decades, earnings have been recognized the most important determinant of equity value of a firm. Ohlson (1995) modeled equity value of a firm as a linear function of both earnings and book value. Burgstahler and Dichev (1997) reported that equity value of a firm is a piece-wise function and not a linear additive function of both earnings and book value. U.S. markets and firms are focused by all major studies. The United States possesses a characteristic that is a strong well-established stock market with a multiplicity of investors. What’s more, none of the investors can influence the stock market individually.In this dissertation, whether earnings and book value have a similar relationship in the Chinese stock market that has different characteristic was examined. China, at present, is an emerging market that has adopted liberal policies in the last three decades. The Chinese stock market has fewer companies relative to the United States. On one hand, it is also relatively inefficient because a few large investors can influence stock prices significantly by their activity of buying and selling. On the other hand, there is some difference in accounting methods between the two markets.