Abstract
The main purpose of the study was to examine the statistical relationship between four sets of accounting information and market share prices using the data of companies listed on the Botswana Stock Exchange over the period from 2012 to 2018. Annual reports and Botswana Stock Exchange – Equity Statistics data bank were the sources of accounting information and market prices respectively. The Ordinary Least Square regression method was used to analyse data. The results suggest that earnings are the most value relevant information to share prices followed by dividends and lastly book value. While book value yielded weak value relevance operating cash flows did not explain changes in share prices in the Botswana equity market. The combination of earnings and dividends was more value relevant than any other mix of accounting amounts. The study further revealed that the market share price at the end of the 6th month from the year end was the most influenced price. These results have implications to quoted companies regarding the importance they attach on earnings and dividends information and their timely publication. The paper recommends for speedy dissemination of earnings and dividends information since investors significantly consider such information in market share pricing decisions.
Highlights
1.1 Background InformationFinancial reporting is concerned with the dissemination of useful information to financial statements users to assist them to make various informed decisions
The results of this study suggest that the value relevance of earnings, dividend and book value was strongest to market share price at the end of 6th month after year end compared to the end of year or end of 3 months after year end prices
This paper set out to examine the statistical association between earnings, book value, dividends and operating cash flows per share with market share prices at 3 different dates
Summary
Financial reporting is concerned with the dissemination of useful information to financial statements users to assist them to make various informed decisions. It is worth mentioning that in recent conceptual frameworks of financial reporting, those of Financial Accounting Standards Board (2010) and International Accounting Standards Board (2018), the attribute of reliability has been replaced by the characteristic of faithful representation (BrainMass, n.d). The attribute of relevance refers to information being capable in making a difference in the decisions made by users. Information capable of making a difference in decisions must have a predictive value (should be able to predict future outcomes) and/or must have confirmatory value (should be able to provide feedback on the previous evaluations (Financial Accounting Standards Board, 2010; International Accounting Standards Board, 2018). The information that does not satisfy the users’ interests is irrelevant to them
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