Abstract
This paper uses the Ohlson Model to analyze whether Net Income (NI), Other Comprehensive Income (OCI), and Comprehensive Income (CI) are value relevant for market value and the return of shares of publicy-traded Brazilian companies. To maximize the robustness of the results, we inserted the following control variables for each model: equity per Share (EqPS), Size (S), Industry (I), EBITDA per Share (EbPS), Revenue per Share (RePS), Liquidity (L), and Gross Domestic Product Growth (GDPG). The control variables S, RePS, and GDPG were significant for the three models related to the value of the company. The control variables EqPS, EbPS, RePS, and L, on the other hand, were only significant for the three models related to stock returns. Our main variables (NI, OCI, and CI) were found to be statistically significant in five of the six regression models after data analysis in a fixed effect panel using robust standard errors. However, only the variables NI and CI were considered to be relevant in the expected direction, meaning that they offered a positive contribution in explaining the value of the company.
Highlights
In this study, we seek to verify whether the relevance of a company’s value can be explained by its net income, by its comprehensive income, and by other comprehensive income
Comprehensive Income In Brazil, the Net Income (NI), before the acceptance of international accounting standards, involved balances that, a er the IFRS was adopted, were highlighted in the Statements of Comprehensive Income, in such a way that the Statements of Income show the “clean” pro t, and the Statements of Comprehensive Income show the income discount of the adjustment of previous scal periods. erefore, a CI aims to show an economic pro t that is closer to reality and becomes an important tool for management analysis
Brazil went through severe changes, since it went from a legal form to the economic substance of the results. e Netherlands, on the other hand, already had an accounting system in which economic substance was over legal form, to the models adopted in the United Kingdom and the United States
Summary
We seek to verify whether the relevance of a company’s value can be explained by its net income, by its comprehensive income, and by other comprehensive income. The guiding question of our research is: How relevant are net income, comprehensive income, and other comprehensive income with regards to the market value and the stock returns of Brazilian companies listed at BM & FBOVESPA?. Erefore, starting from the aforementioned change in Brazilian legislation, results/pro t are considered to be “cleaner” (since scal adjustments must be done in speci c statements to the treasury, and not in accounting records), motivating the market to nd value relevance in this information. Considering that SFAS 130 allowed companies to choose to report components of the CI in their statements of net equity or their statements of performance, the FASB issued the Accounting Standards Update –ASU– 2011-05, to improve the comparability, consistency, and transparency of nancial information (Schaberl & Victoravich, 2015). Hypothesis 6: e Other Comprehensive Value has a relevant value for the Return on Stocks of the companies listed in BMG & BOVESPA
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