Analysis of the Relevance of Information Content of the Value Added Statement in the Brazilian Capital Markets

Márcio André Veras Machado,Marcelo Alvaro Da Silva Macedo,Márcia Reis Machado

doi:10.1590/1808-057x201512240

Márcio André Veras Machado, Marcelo Alvaro Da Silva Macedo + Show 1 more

Open Access

https://doi.org/10.1590/1808-057x201512240

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Abstract

The usefulness of financial statements depends, fundamentally, on the degree of relevance of the information they disclose to users. Thus, studies that measure the relevance of accounting information to the users of financial statements are of some importance. One line of research within this subject is in ascertaining the relevance and importance of accounting information for the capital markets: if a particular item of accounting information is minimally reflected in the price of a share, it is because this information has relevance, at least at a certain level of significance, for investors and analysts of the capital markets. This present study aims to analyze the relevance, in the Brazilian capital markets, of the information content of the Value Added Statement (or VAS) - referred to in Brazil as the Demonstração do Valor Adicionado, or DVA. It analyzed the ratio between stock price and Wealth created per share (WCPS), using linear regressions, for the period 2005-2011, for non-financial listed companies included in Melhores & Maiores ('Biggest & Best'), an annual listing published by Exame Magazine in Brazil. As a secondary objective, this article seeks to establish whether WCPS represents a better indication of a company's result than Net profit per share (in this study, referred to as NPPS). The empirical evidence that was found supports the concept that the VAS has relevant information content, because it shows a capacity to explain a variation in the share price of the companies studied. Additionally, the relationship between WCPS and the stock price was shown to be significant, even after the inclusion of the control variables Stockholders' equity per share (which we abbreviate in this study to SEPS) and NPPS. Finally, the evidence found indicates that the market reacts more to WCPS (Wealth created per share) than to NPPS. Thus, the results obtained give some indication that, for the Brazilian capital markets, WCPS may be a better proxy concept for referring to a company's result than NPPS.

Highlights

The usefulness of financial statements depends, fundamentally, on the relevance of the information that is published to users
Accounting information can be said to be relevant when it has certain characteristics, such as: (i) that it helps to reduce the asymmetry of information between internal users and external users of the company; or (ii) that it helps the user to evaluate the potential effect of past, present and future transactions on future cash flows and/or to confirm or correct prior evaluations; or (iii) when its use alters the user’s decision, that is to say, when the user takes a different decision than he/she would otherwise have taken without certain information
The results were very different from those found by Scherer (2006), since this study found no evidence of relevance of value added, with the exception of the companies listed on the specialized segments of the BM&FBOVESPA that require commitments to higher levels of corporate governance

Summary

Introduction

The usefulness of financial statements depends, fundamentally, on the relevance of the information that is published to users. Studies that seek to analyze the relationship between companies’ market value and accounting figures are referred to as “value relevance” studies. These studies aim to determine the relevance of a given item of information to the capital markets, by seeing whether that information is reflected in a company’s stock prices. Barth, Beaver, and Landsman (2001) considered an item of information to be relevant if it was correlated with the company’s market valuation These studies aim to determine the relevance of a given item of information to the capital markets, by seeing whether that information is reflected in a company’s stock prices. Barth, Beaver, and Landsman (2001) considered an item of information to be relevant if it was correlated with the company’s market valuation

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