Liberalisation and the value relevance of accrual accounting information: evidence from the Johannesburg securities exchange

Abstract

Using panel data from 118 firms across a time period of 17 years and a battery of tests, this paper examines two research questions that pertain to the expected gains stemming from corporate information liberalisation through the adoption of international accounting (financial reporting) standards. Results indicated that accrual accounting data at aggregate (market-wide) level did not show break point(s) around the time of critical corporate information liberalisation years. At the microlevel, panel data tests on a version of Ohlson's (1995) model showed poor fits, but initially indicated some improvement (adjusted R-squares of between 12% and 25%) in value relevance in the post-information liberalisation period. However, when scale issues were addressed in cross-sectional level-type panel regressions, the difference in the R-squares vanished; suggesting that the value relevance of accounting information did not improve in the post-liberalisation period.