The value relevance of accounting information around the 1997 Asian financial crisis—the case of South Korea

Abstract

This paper examines the value relevance of accounting earnings, book value of equity, and cash flows from operations for Korean firms during the 1995–1998 period. The results indicate that the value relevance of accounting earnings for Korean firms significantly declines from the pre-crisis (1995–1996) to the in-crisis (1997–1998) period. The declining importance of earnings, however, is not replaced by the increasing value relevance of book value of equity during the same period. There is also evidence that cash flows from operations become more value-relevant in the 1997–1998 period. Finally, the results hold after controlling for the amount of foreign exchange translation gains and losses included in earnings and book value. © City University of Hong Kong.