Relevance Of Accounting Information Research Articles

IFRS Convergence and Value Relevance of Indian Accounting Information: The Earnings-Returns Association Analysis

Manuscript type: Research paper Research aims: India has recently joined the accounting revolution by implementing the International Financial Reporting Standards (IFRS) through the convergence mode. This paper aims to examine the value relevance of Indian accounting information by finding an association between stock returns and the levels of earnings and changes in earnings. Design/Methodology/Approach: The study follows both relative and incremental association approaches to investigate changes in the value relevance of accounting information prepared using the IFRS converged Indian Accounting Standards (Ind-AS), while also examining the impact of their voluntary use. The study employs the Easton and Harris (1991) model on accounting data collected from 2012-13 to 2019-20. The panel data of 7,064 firm-year observations covers 883 firms listed on the National Stock Exchange (NSE) and uses relevant econometric tests and multivariate panel regressions to test the hypotheses. Research findings: The findings reveal a decline in the returns value relevance following both mandatory and voluntary IFRS convergence. Theoretical contribution/Originality: The study is the first to document the changes in value relevance based on stock returns since the IFRS convergence process began in India. Practitioner/Policy implication: This line of research is significant in Indian capital markets to unravel the effects of the new standards on accounting as well as stock market variables. It has managerial implications for firm and standard-setters. Research limitation: The value relevance results are based on the returns model alone and the study does not analyse the price model.

The Impact of Environmental Uncertainty on Accounting Information Relevance and Performance: A Contingency Approach

This paper examines the association between environmental uncertainty, accounting information relevance, and organizational performance. From a contingency approach, this paper attempts to contribute to a stream of research that investigates the relationship between accounting information relevance and organizational performance. The presence of environmental uncertainty in this relationship has not been fully established. This paper contributes to this area by suggesting a framework to study and explain this connection. An online questionnaire-based survey was conducted, which produced 119 valid responses (a response rate of 23%) from large manufacturing companies operating in Portugal. The results suggest that in contexts of environmental uncertainty, the relevance of non-financial information increases. However, the relevance of financial information continues to outstrip that of non-financial information. The results also suggest that financial information and non-financial information are complementary, and not substitutes, and can be used simultaneously in different situations. These results have several implications for professionals involved in decision-making activities. It offers findings which are potentially useful for both theory and practice. The study addresses an identified gap in the literature and adds to the existing body of work analyzing the association between environmental uncertainty, accounting information relevance for decision-making purposes, and organizational performance.

Value Relevance of Accounting Information and Noise Trading in Banks and Financial Institutions

This study aimed to analyze the financial accounting information's relative and incremental value relevance between 2012 and 2019. It also analyzed the relationship between noise trading and the value relevance of financial accounting information using 564 firm-year observations on banks and financial institutions in the Indonesia Stock Exchange (IDX) from 2012 to 2019. The price valuation model prepared by Ohlson [1] was used to test the value relevance of accounting information. The findings showed the relative and incremental value relevance of earnings and book value during the study. Furthermore, noise trading has a moderating effect on the earnings' value relevance. The samples used were from the financial sector to compare value relevance from previous literature on manufacturing companies. The results could be useful to current and potential investors while considering investing in the financial sector.

Primena principa konzervativizma nasuprot primeni koncepta fer vrednosti - primer srpskog tržišta kapitala

The characteristic of striving towards the application of the new valuation concept, as opposed to the application of traditional accounting principles, modern financial reporting prompted the authors of this paper to address the importance of the application of traditional accounting principles, especially the principle of prudence (conservatism), and the concept of fair value for the accounting information relevance. The most important business decisions in the entity are made on the basis of information produced by the accounting information system, based on which we see how important it is for this information to be up to date. The relevance of the information of the accounting system of first-class importance is the basis of evaluation, which is the subject of research in this paper. More precisely, the paper examines the methods of measurement after initial recognition of fixed assets on the example of a group of business entities operating on the Serbian capital market. The results of empirical research are of a twofold nature. Namely, for measurement after initial recognition of intangible assets, plant and equipment, as well as other property, plant and equipment, the concept of historical cost and the traditional accounting principles immanent to it are primarily used. For measurement after initial recognition of buildings, land, investment property and biological assets, the concept of fair value is more often used. In other words, using a practical example, we have shown that the combined basis of financial reporting is the dominant feature of modern financial reporting of entities operating in the Serbian capital market.

Is Accounting Information Still Relevant in the Internet Age? Research on the Determination of the Effect of Google Trends Data on Earnings Response Coefficient: Case of Vietnam

When determining the role of accounting information, earnings response coefficient (ERC) is usually used for discovering the relationship between new earning information and unexpected share returns in relation to the event of releasing financial statements. In the context that most of the firm-related information is now available for investors via Internet platform, this study addresses the question how the public attention of the company through the Internet affects the response of the market to the accounting information releasing, or in other words, how market reaction to the firm’s unexpected earnings is affected by Internet information trends. Using a sample of VN30 baskets of Vietnamese listed firms (excluding the financial institutions) in the Ho Chi Minh Stock Exchange (HOSE) from 2015 to 2018 and the Google trends data from the same period, the study examines investigate the possible relationship between Google trend and the earnings response coefficient. The results from regression indicate that the ERCs of Vietnamese firms is positive and the interest of the firms on the Internet has no significant impact on ERC. The main findings expecting to contribute to providing direct support that the relevance of accounting information are still valuable in the Internet age. This paper is expected to make a contribution to research of accounting information relevance in terms of extending to sample in developing countries like Vietnam.

Does Financial Statement Information Still Matter?

Financial statements have been used as a medium for communicating corporate performance to the various stakeholders of business organizations. As such, they are expected to have some qualitative characteristics to be able to facilitate this communicative role and provide useful information for investment decision making. To this end, this study was carried out to examine the accounting information relevance on market performance of companies in Nigeria. The study adopted the panel data design and data were obtained from annual reports of companies for the year 2017. The population of the study consisted of all listed industrial and consumer goods companies in Nigeria. A sample size of 37 companies in the industrial and consumer goods sector was randomly selected and utilized for the study. The multivariate regression analysis was adopted as data analytical method. The study using the results of the multivariate regression shows that earning per share; dividends per share and book value per share all have a significant positive relationship with share prices. The study also finds that cash flow from operating activities has a positive but weak correlation with share prices while leverage has a negative and non- significant relationship with share prices. The study concludes that accounting information disclosure in Nigeria has not lost its relevance as investors still use them in making economic and business decisions. Keywords: Value Relevance, Accounting Information, Financial Statements, Share Prices, Earnings. DOI : 10.7176/RJFA/10-13-03 Publication date :July 31 st 2019

A influência dos ativos intangíveis na relevância da informação contábil

http://dx.doi.org/10.5007/2175-8069.2017v14n31p26O objetivo do presente estudo foi analisar a influência dos ativos intangíveis na relevância da informação contábil. A metodologia utilizada caracterizou-se como descritiva, documental e quantitativa. A amostra do estudo constituiu-se de 164 empresas listadas na BM&FBOVESPA, no período de 2010 a 2013. A análise das informações foi realizada por meio de regressão de dados em painel, com a utilização dos softwares STATA e SPSS. Os resultados apontaram que lucro líquido, patrimônio líquido, ativo intangível, goodwill, patrimônio líquido ajustado e lucro líquido ajustado são informações relevantes para o mercado de capitais, as quais impactam no preço das ações até 6 (seis) meses depois de publicadas as demonstrações financeiras. Esses resultados revelam a importância para o mercado de capitais das informações contábeis ora apresentadas, tanto as tradicionais - como lucro líquido e patrimônio líquido - quanto as relacionadas aos ativos intangíveis. Tais informações contábeis demonstraram-se relevantes para os investidores decidirem na compra e venda de ações. Desta forma, infere-se a necessidade das empresas divulgarem seus ativos intangíveis, uma vez que tal prática pode contribuir para o aumento do preço de suas ações no mercado de capitais.

Comparative evidence on the value relevance of IFRS-based accounting information in Germany and the UK

This paper uses panel cointegration with a corresponding vector error correction model (VECM) to investigate the changes in the value relevance of accounting information before and after the mandatory adoption of IFRS in Germany and the UK under three different valuation models. First, a basic Ohlson model, where our results indicate that despite the value relevance of the book values of equity has declined, it has been replaced by the increasing prominence of earnings in both Germany and the UK after the switch to the IFRS. Second, a modified model, which shows that the incremental value relevance of both earnings and book values are considerably higher in the long term for firms in the UK than in Germany. Third, a simultaneous addition of accounting and macroeconomic variables in an extended model, which indicates a significant rise in the relative predictive power of the book value of equity in the UK compared with the more noticeable impact on the value relevance of earnings in Germany. Collectively, the results of these models indicate that: (i) the explanatory power of linear equity valuation models is higher in UK than in the Germany, (ii) a long-run Granger-causal relationship exists between accounting variables and share prices in common law countries like the UK. Nevertheless, the implications of our findings lie in the knowledge that the potential costs of switching to the IFRS is completely nullified within three years by the benefits arising from a reduction in information asymmetry and earning mismanagement among firms which are listed on the stock exchanges of both common law and code law-based EU countries.

Hedge Accounting in the Brazilian Stock Market: Effects on the Quality of Accounting Information, Disclosure, and Information Asymmetry

ABSTRACT This paper investigates, in the Brazilian stock market, the effect of hedge accounting on the quality of financial information, on the disclosure of derivative financial instruments, and on the information asymmetry. To measure the quality of accounting information, relevance metrics of accounting information and book earnings informativeness were used. For executing this research, a general sample was obtained through Brazilian companies, non-financial, listed on the Brazilian Securities, Commodities, and Futures Exchange (BM&FBOVESPA), comprising the 150 companies with highest market value on 01/01/2014. Through the general sample, samples were compiled for applying the econometric models of value relevance, informativeness, disclosure, and information asymmetry. The sample for relevance had 758 companies-years observations within the period from 2008 to 2013; the sample for informativeness had 701 companies-years observations with the period from 2008 to 2013; the sample for disclosure had 100 companies-years observations, within the period from 2011 to 2012; the sample for information asymmetry had 100 companies-years observations, also related to the period from 2011 to 2012. In addition to the econometric models, the propensity score matching method was applied to the analyses of the hedge accounting effect on disclosure and information asymmetry. The evidence found for the influence of hedge accounting indicates a relation: (i) positive and significant concerning accounting information relevance and disclosure of derivatives; (ii) negative and significant for book earnings informativeness. Regarding information asymmetry, although the coefficients showed up as expected, they were not statistically significant.

Company's Characteristics and Accounting Information Relevance

The paper examines whether company's characteristics, namely, stockholders number, listing status and company's age affect its accounting information relevance and which stock price measure, among average price, closing price and after three months price, is more dependable in pointing out the accounting information value relevance for a sample consists of 91 companies in the services and industrial sectors in Jordan within 2004-2013. Using price model, it is found that companies with larger stockholder numbers, listed on Amman Stock Exchange primary market, and that are older in age yield greater value relevance for per share earnings and book value. Book value has the greatest value relevance being the best predictor for firm value, while cash flows showed insignificant results. Finally, we concluded that closing price is the most dependable among the three stock price measures in detecting the accounting information value relevance in Jordan. The paper presents the ability of valuation theory/model to interact with other theories by including the effect of non-accounting information on the accounting information value relevance. Our findings might present evidence that can serve the educational institutions in their courses and provide a guideline to investors, managers and financial analysts to better summarize the firm value.

Owners’ Equity and Accounting Information Relevance

The paper examines the influence of equity ratio on the value relevance of earnings and book value for Jordanian industrial companies from 1992 to 2002. The findings show that equity ratio significantly influenced the value relevance of individual book value but not earnings. In their combination, the paper indicates that share prices respond more to book value than earnings. Our findings might increase the valuation practices understanding of financial statements users and provide fundamentals for future studies that aim to examine our hypotheses in more details.

Effects of Board of Directors' Characteristics on the Quality of Accounting Information in Brazil

One of the board of directors' responsibilities is to monitor the quality of information disclosed in financial reports. The board's structural and compositional characteristics can affect the quality of reported accounting information. The aim of this study was to investigate the effects of the board's structural and compositional characteristics on the quality of accounting information of companies listed on the Brazilian Securities, Commodities, and Futures Exchange (Bolsa de Mercadorias e Futuros - BM&FBovespa). Specifically, the characteristics studied were the size and independence of the board of directors and separation of the roles of chairman and executive director. Accounting information relevance and earnings informativeness were used as proxies for the quality of accounting information. The sample included non-financial companies listed on the BM&FBovespa with annual stock market liquidity higher than 0.001, covering the period from 2008–2011. Data were collected from the Economática® database and directly from companies' annual reports and reference forms available on the Securities Commission (Comissão de Valores Mobiliários - CVM) or BM&FBovespawebsites. Data analysis was undertaken using the multiple regression technique for calculating the models of accounting information relevance and earnings informativeness. The results reveal that, for companies that trade stocks on the BM&FBovespa in the Brazilian market, the characteristics of board independence and separation of the roles of chairman and executive director positively influence the quality of reported accounting information, specifically regarding the relevance of equity. Earnings informativeness is positively affected by board independence and negatively affected by larger board size (more than nine members). Overall, the results corroborate international studies such as those of Vafeas (2000), Firth, Fung, and Rui (2007), Ahmed, Hossain, and Adams (2006) and Dimitropoulos and Asteriou (2010), especially regarding board independence. The study showsthat stronger governance structures have a positive effect on the quality of reported accounting information.

The Impact of a Major Financial Event on the Value Relevance of Financial Instruments Fair Value

In this erratically changing environment, it is important to recognize how the value relevance of accounting information adopts to changes. This study investigates how the incremental explanatory power of fair-value accounting information on financial instruments was affected during the 2008 financial crisis in Taiwan. Results suggest that during the financial meltdown, the value-relevance of fair-value accounting information decreased significantly. Furthermore, the value relevance of part of fair-value accounting information ceased to exist. The results suggest that the value relevance of fair-value accounting information on financial instruments varies with the environment but is not affected by company characteristics.

THE RELEVANCE OF ACCOUNTING INFORMATION AND FINANCIAL DISTRESS OF LOCAL GOVERNMENT IN EAST JAVA

Financial distress is an inability of local government to give public services appropriate with minimum standards of service caused by lack of funds. This condition is a negative signal of local government because reflects bad government’s performance. The aim of this research is examining accounting information relevance to financial distress of local government in East Java. Accounting information relevance is measured by ROA, POSGW, PERGW, CLGW, CL and DTR. Whereas, local government’s financial distress is measured by DSCR based on the decree issued by the government No. 54 year 2005 concerning regional loans. The sample of this research is local government in East Java both counties and cities. Census method is used to collect the samples because every element in the population is used as samples. Pearson’s correlation product is used to analyze the data. The statistical test result shows that POSGW, CLGW, CL and DTR have a strong enough relationship and unidirectional to DSCR. This result is in line with agency theory which states that local government will seek to minimize financial distress condition by optimizing their financial performance. It can be concluded that accounting information relevance has a relationship to local government’s financial distress.

La repercusión del valor razonable de los bienes inmuebles en la utilidad de los estados financieros: una nota de investigación

The option in the recent Spanish regulation for fair value over historical cost, as the preferred measurement basis for some assets, has raised some controversy. This paper studies the effects on accounting information relevance and reliability of fair value accounting for investment properties. The empirical study is based on a questionnairebased survey of the perceptions of 151 Spanish accountants in the building industry about the usefulness and reliability of fair value accounting. The analysis of results allows us concluding that accountants perceive that the usefulness of financial statements increases when investment property is valued on a fair value basis, compared with a historical cost basis. However, respondents conceive fair value accounting as less objective and verifiable. We have also observed that firm size may influence the opinion of the impact of fair value on the relevance and reliability of financial statements.

Corporate governance and ADR effects on earnings quality in the Brazilian capital markets

The value relevance of accounting information has been tested in many studies, however, there are little evidence from Brazil about the content information in earnings and the improvement of its relevance according to adoption of better corporate governance practices and the cross listing on the NYSE. This study aims to verify the impact of earnings interactively with corporate governance levels of BOVESPA and ADR listing on the NYSE on firms’ market value measured by market-to-book ratio. Our sample is composed by 231 public companies’ listed and unlisted on special segments of governance at BOVESPA and on the NYSE from 2000 up to 2006, totalizing 1.253 observations. Methodologically, we present results of different estimation procedures such as Pooled Ordinary Least Squares (POLS) and panel data with Random Effects (RE) and Fixed Effects (FE) following Breusch-Pagan and Hausman Tests to indicate the best estimators. The results indicate that: i) BOVESPA’s corporate governance levels improve the content information of accounting earnings reported and enhance the coefficients; ii) earnings of firms’ which trade ADR on the NYSE are not relevant but, have positive coefficients and; iii) the content information in earnings of firms listed on Level 2 and level New Market are more relevant from firms on Level 1 or unlisted. This paper contributes with the discussion about accounting information relevance to the market, investors, regulators and practitioners, as well as, the role of corporate governance to improve information quality.

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

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.

Relação entre barreiras de entrada e o retorno empresarial no mercado brasileiro a partir de dados das demonstrações contábeis

O artigo busca relacionar fatores da teoria da estratégia do posicionamento a parâmetros das demonstrações contábeis, mais especificamente utiliza-se de medidas contábeis para verificar, de forma geral, a aderência da teoria da estratégia do posicionamento no mercado brasileiro, por meio da relação entre a variável tamanho (proxy para Barreira de Entrada) e o retorno da unidade empresarial. Na pesquisa bibliográfica, a preocupação foi relacionar os conceitos existentes na teoria contábil com os conceitos de estratégia competitiva da escola do posicionamento. Por conseguinte, aplicou-se um teste empírico, utilizando inferências estatísticas entre duas médias para verificar a existência de relação positiva entre as variáveis tamanho (Barreiras de Entrada) e o retorno das unidades empresariais no mercado brasileiro, a partir de informações contábeis. Os resultados dos testes demonstram que os retornos das empresas de maior tamanho são superiores aos das empresas menores no mercado brasileiro. Esse resultado insere indicativos da relevância da informação contábil, quando relacionada com a estratégia competitiva da escola do posicionamento.