Value Relevance Of Accounting Information Research Articles

Impact of Firm's Value Relevance of Accounting Information on Stock Returns during Market over and under Reactions in Pakistan

Value relevance of accounting information (VRAI) is a fundamental characteristic of influencing stock returns. This study analyzes the impact of VRAI on stock returns during market under and overreaction in Pakistan. The data of 322 non-financial firms listed in PSX from 2005 to 2022 is used. To explain stock returns, we employ the annual stock returns and buying and holding returns model. The data on financial variables has been collected from annual reports published on the company's websites and PSX Data Stream. The outcomes show that the accounting information variables earnings per share and change in earnings per share are positively related to the stock returns during market over and under reaction. Earnings per share, net income and book value are significantly related to the BHAR diuuring market under and overreaction while earnings per share and book value are significantly related to the BHAR during market overreaction of non-financial firms. It is also concluded that balance sheet variables attract more investors to invest in the stock market during the underreaction of non-financial firms. Therefore, it is suggested that the non-financial firms must present adequate accounting information on their financial statements within the specified time frame.

The value relevance of accounting information: empirical evidence from Jordan

PurposeThis empirical study’s primary goal is to examine the connection between accounting information and share price for financial companies listed on Jordan’s expanding Amman Stock Exchange (ASE) between 2014 and 2018.Design/methodology/approachThe correlation between accounting data and share price was investigated using multiple regression analysis. In this vein, “pooled ordinary least squares (OLS), fixed effect and random effect” static panel data estimators were used. The OLS model was chosen as the best model after a series of diagnostic tests.FindingsThe multiple proxies of accounting information value relevance have a positive and considerable impact on the market value per share, according to panel data research. Comparatively, the authors find proof that among the other accounting data – earnings, dividends and cash flow from operations – book value is statistically the most value-relevant.Research limitations/implicationsThis empirical investigation was only conducted in Jordan. Because it is very likely to obtain different results in other nations, the findings cannot be applied to other business environments.Practical implicationsThe findings of this paper may highlight the amazing relationship between accounting information and share price for policymakers, regulators and other stakeholders in developing nations, notably in Jordan. This could pave the way for effective accounting disclosures.Originality/valueSeldom does empirical research on the relationship between accounting data and share prices from publicly traded companies on ASE exist. So, by demonstrating empirical findings from Jordanian companies, this study fills the gap in the existing literature and knowledge.

The value relevance of accounting information moderated by earnings management: Evidence from listed companies in the developing market

This research aims to investigate the value relevance of accounting information (VRAI) and the effect that earnings management (EM) has on the VRAI. Research on the VRAI is generally carried out using the model introduced by Ohlson (1995). Problems will occur when the VRAI as a company performance measurement tool is faced with the practice of manipulation by managers. This study’s population is all manufacturing companies listed on the LQ45 Index. Sampling-based on purposive sampling; the research sample obtained as many as 16 samples over three years, so the number of observations is 48 companies per year. The data analysis technique used multiple linear regressions with moderating variables or moderated regression analysis (MRA). The results show that earnings per share (EPS) have value relevance (VR), and book value (BV) has VR. Operating cash flow (OCF) has no VR. Management weakens the VR of earnings, EM is not moderating BV relevance, and EM strengthens the VR of OCF.

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.

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.

The impact of institutional ownership on the value relevance of accounting information: evidence from Egypt

PurposeThis paper aims to examine the value relevance (VR) of accounting information (AI) presented by Egyptian listed non-financial companies. Further, the study investigates the influence of institutional ownership on the value relevance of AI in a developing market, namely, the Egyptian market.Design/methodology/approachThe study uses data from 2014 to 2017 with a total of 248 observations and analyses the data using regression analysis. Data are collected from the nonfinancial companies listed on the Egyptian Stock Exchange.FindingsThe authors found that the AI reported by the Egyptian listed non-financial companies is value relevant. Regarding the influence of institutional ownership, it is found to significantly impact the VR of AI reported by the sample companies. This model investigated the effect of corporate size and financial leverage as controlling variables and found that they have an insignificant influence on the VR of AI.Originality/valueThe current study findings enrich the literature by enhancing the understanding regarding institutional owners’ impact on corporate value. Further, bringing evidence from an emerging market can have implications for accounting researchers interested in addressing other emerging markets with similar contextual and institutional environments.

Governance role of media coverage: from the view of accounting information value relevance and market value about share pledge firms in China

PurposeShare pledge is a popular way to raise funds in China, but it aggravates information asymmetry. As an indispensable information intermediary in the financial market, media coverage affects asset price and pricing efficiency and impacts information asymmetry. This study aims to explore the governance role of media coverage as an information intermediary in the share pledge context in China.Design/methodology/approachModerating effect and mediating effect analyses are the primary methods used to test the governance role of media coverage. The ordinary least squares model was used to test the relationship between share pledge and market performance and then proved the moderating effect of media coverage toward the corporate market value of pledge firms. Accounting earnings value relevance models were explored to test the path of media coverage on firm market value by mediating effect analysis. At last, subgroup tests were used to verify the heterogeneity of the moderating effect of media coverage.FindingsIn the context of share pledge in China, the higher the share pledge ratio, the higher is the market value of listed firms, which verifies the motivation of controlling shareholders to avoid the transfer of control right and the motivation to tunneling. Media coverage has a significant negative moderating effect on the relationship between share pledge rate and corporate value and has a significant impact on the accounting earnings value relevance of share pledge firms. From the perspective of long-term earnings, media coverage reduces the market performance of share pledge firms by reducing the value correlation of accounting earnings information. From the short-term price point of view, media coverage reduces the market performance of share pledge firms by improving the value correlation of accounting earnings information. Furthermore, media coverage has a more significant moderating effect in state-owned share pledge firms and low information transparency and low information disclosure quality firms.Research limitations/implicationsThis paper does not distinguish the mode difference of spreading news and the impact of non-pledge media coverage. Also, this paper does not consider factors other than accounting information value relevance when exploring how media coverage affects the corporate market value. Share pledge firms should use media for publicity and play a role in media governance and should actively improve their information disclosure quality, strengthen communication with investors and reduce information asymmetry fundamentally.Practical implicationsThis paper diversify the governance choices for share pledge firms and has important implications for firms, investors, information intermediaries and regulators. Media reports play an increasingly important role today, and any reports and predictions of major events may profoundly affect investors’ decisions. Although media reports can make up for the weakness of accounting information disclosure of equity pledge companies in some sense, it is still not a long-term strategy. Equity pledge companies should not only make use of media for publicity and play a role of media governance but also actively improve their information disclosure quality.Originality/valueThis paper focuses on share pledge firms to carry out in-depth research. Based on exploring the influence mechanism of share pledges, the authors find the importance of media governance. This paper expands the literature about the economic consequences of share pledges and provides empirical data for media governance of share pledge firms. This paper innovatively proves the governance role of media coverage from the view of accounting information value relevance. The main innovation point is the long and short-term perspective analysis of the influence of media coverage on the correlation of accounting earnings value. The heterogeneity effect analysis of media coverage also reflects the depth and strong practical guiding significance of this study.

The Value Relevance of Accounting Information and its Impact on Stock Prices: A Study on Listed Pharmaceutical Companies at Dhaka Stock Exchange of Bangladesh

This study intends to determine the Value relevance of accounting information (VRAI) that emphasizes the impact of different information produced by accounting on the market price of the share. This paper tries to determine the VARI on pharmaceutical companies' share price at the Dhaka Stock Exchange (DSE) of Bangladesh. For this purpose, I have collected data from different Pharmaceutical companies listed under the DSE for the period starting from 2017 to 2019. In this study correlation, ANOVA and regression analysis are applied to ascertain the association between Financial Accounting Information like Earnings per Share (EPS); Net Operating Cash Flow Per Share (NOCFPS); Net Asset Value Per Share (NAVPS); Cash Dividend Per Share (CDPS), and Stock Dividend Per Share (SDPS) and Market Value Per Share (MVPS). The results confirmed a statistically significant positive relationship of NOCFPS, NAVPS with MVPS. Differently, the results also confirmed a statistically significant negative relationship between EPS and MVPS. The results also ascertained that CDPS, and SDPS have no significant but positive relationship with MVPS. Finally I concluded that the information produced by accounting systems are value relevance and important in decision making. The existing literature of VRAI will enrich by results of this study. This study recommends the existing and potential investors to use accounting information for taking efficient and effective investment decisions.

AUDIT COMMITTEE AND ACCOUNTING INFORMATION VALUE RELEVANCE

This paper describes the results of empirical research investigated the effect of audit committee characteristics (AC) on the accounting information value relevance (VR) for Indonesian companies in 2014 - 2018. VR is measured using the Ohlson Model, while AC is measured using its members and its independence members. By using data of 590 firm-years, this study found that the size of the committee audit and the AC independence positively affects the value relevance of EPS. Yet, the AC size affects negatively the BVS value relevance whereas the AC independence does not affect BVS value relevance. These results enrich the literature of value relevance, especially in connection to the AC characteristics.

MODERATING EFFECT OF LEVERAGE ON THE VALUE RELEVANCE OF ACCOUNTING INFORMATION IN THE NIGERIAN LISTED OIL AND GAS FIRMS

The study investigates the moderating effect of leverage on the value relevance of accountinginformation in the Nigerian listed oil and gas firms. The study used correlational research designand the data was extracted from the published annual financial reports of the firms for theindependent variables and the moderator. On the other hand, the data for the dependent variable(share prices) was collected from Nigerian stock exchange website. A sample size of 6 firms wereused for a period of eight years (2011-2018). The data was analysed using multiple regressionanalysis. Findings from the analysis showed that earnings per share, and leverage to be valuerelevant. Additionally, book value per share moderated with leverage was value relevant in additionto earnings per share moderated with leverage as well. Based on the findings, the study recommendsthat listed oil and gas firms in Nigeria should strategize to improve their earnings, Moreover, theyshould also find way of managing their book value, as any unnecessary investment means negativeeffect on share price. Additionally, listed oil and gas firms should maintain an appropriate level ofleverage so that the cheap cost of leverage will reduce the weighted average cost of capital andsubsequently increase value to investors. Finally, the explanatory power of the moderated variablesare more than the ones not moderated.

Boards’ Characteristics, Voluntary Disclosure, and Accounting Information Value Relevance – Indonesian Evidence

This paper describes empirical evidence which investigates the effect of boards’ characteristics and voluntary disclosure on the accounting information value relevance. Voluntary disclosure (VD) is measured by voluntary disclosure index, a measure which in line with some regulations in Indonesia, especially the Company Act No. 40 of 2007 about the limited corporation; board’s characteristics are proxy by board’s independence (BIN) and board’s size (BSIZE), whereas value relevance is measured by the Ohlson Price Model. Using the 119 manufacturing firms listed in the Indonesian Stock Exchange (IDX) for the year of 2011 to 2015 as a sample, taken by purposive sampling technique, this study finds that the voluntary disclosure strengthens the value relevance of earnings number but decreases the value relevance of book value number. Moreover, board size strengthens the value relevance of earnings and book value. Finally, board independence strengthens the value relevance of earnings number and book value number. This study provides additional evidence about the influence of boards’ characteristics and the effect of voluntary disclosure on the value relevance of accounting information with the evidence from Indonesia. Paper ini menguraikan hasil penelitian yang menginvestigasi pengaruh pengungkapan karakteristik dewan komisaris dan pengungkapan sukarela terhadap relevansi nilai informasi akuntansi. Pengungkapan sukarela (VD) diukur menggunkaan indeks pengungkapan, sesuai dengan regulasi yang berlaku di Indonesia, khususnya Undang- undang Perseroan Terbatas No. 40 tahun 2007 tentang perseroan terbatas; karakteristik dewan komisaris diproksi dengan independensi (BIN) dan ukuran (BSIZE), sedangkan relevansi nilai diukur dengan Model Harga Ohlson. Dengan menggunakan data perusahaan manufaktur yang terdaftar di Bursa Efek Ilndonesia (IDX) pada tahun 2011 sampai 2017 yang dipilih menggunakan teknik purposive sampling, penelitian ini menemukan bahwa pengungkapan sukarela memperkuat relevansi nilai laba namun menurunkan relevansi nilai untuk nilai buku. Selain itu, ukuran dewan komisaris memperkuat relevansi nilai laba dan nilai buku. Terakhir, independensi dewan komisaris juga memperkuat relevansi nilai laba dan nilai buku. Hasil penelitian ini melengkapi hasil penelitian sebelumnya tentang pengaruh karakteristik dewan komisaris dan pengungkapan sukarela terhadap relevansi nilai informasi dengan menggunakan data perusahaan di Indonesia.

Ownership Concentration, Firm Size, and Information Value Relevance: Indonesian Evidence

This paper describes empirical evidence investigated the effect of ownership concentration and firm’s size on the accounting information value relevance. Ownership concentration (OC) is measured by Herfindahl index; firm's size is measured by a log of total assets, whereas value relevance is measured by the Ohlson’ Price Model. Using a sample of 119 manufacturing firms listed in Indonesian Stock Exchange (IDX) for the year of 2011-2015, this research finds that ownership concentration positively affects both the value relevance of earnings per share and book value per share. Moreover, the firm's size negatively affects the value relevance of earnings per share and book value per share. This study contributes to the existing literature about value relevance of ownership concentration and value relevance of firm's size, especially in the post- IFRS adoption period.

THE VALUE RELEVANCE OF EARNING MEASUREMENT USING OHLSON MODEL: A META-ANALYSIS

The researchers of accounting information value relevance using Ohlson model had operationalized several earnings measurement proxies. The results of the studies indicated that the level of value relevance and significance influence of each proxy varied. This research aimed to combine this diversity and reveal which earnings measurement proxy has significant value relevance. Meta-analysis of 97 published studies using Ohlson model confirmed the significant relationship between earnings and equity market values. This significant relationship was found in the measurement proxy of abnormal earnings, extraordinary earnings before items, earnings per share and net income. Meta-analysis also found that for proxy net income measurement required investigation of moderating variables.

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.

Does IFRS Convergence Promote the Value Relevance of Accounting Information?

<p>Penelitian ini bertujuan untuk memperoleh bukti empiris mengenai adanya kandungan informasi, relevansi nilai informasi akuntansi dan pertumbuhannya selama proses konvergensi IFRS di Indonesia. Secara khusus penelitian ini dilakukan pada perusahaan perbankan, asuransi dan pembiayaan yang terdaftar di Bursa Efek Indonesia. Kandungan informasi diindikasikan oleh Trading Volume Activity dan Variability of Abnormal Return. Adapun relevansi nilai informasi akuntansi diproksikan oleh koefisien regresi dari fungsi pengaruh informasi akuntansi terhadap harga saham. Hasil penelitian ini menemukan adanya kandungan informasi serta relevansi nilai informasi akuntansi selama periode konvergensi IFRS. Temuan empiris ini menjadi salah satu indikasi adanya manfaat konvergensi IFRS bagi relevansi nilai informasi akuntansi. Berkaitan dengan konvergensi itu sendiri, penelitian ini menemukan bahwa relevansi nilai informasi akuntansi mengalami peningkatan secara bertahap selama periode konvergensi. Relevansi nilai informasi akuntansi ditemukan pada perusahaan dengan rasio saham diperdagangkan yang tinggi serta perusahaan dengan saham yang tidak likuid. Relevansi nilai yang lebih tinggi juga ditemukan pada perusahaan yang terafiliasi dengan perusahaan dari negara yang mengadopsi IFRS.</p>

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.

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 impact of reforms on the value relevance of accounting information: Evidence from Iran

This paper examines the value relevance of accounting information in Iran for the period 1996 - 2008, before and after the codification of national accounting standard in 2001, which could describe the effect of codification of the first national accounting standards by The Iranian Association of Certified Public Accountants. The results obtained from a combination of regression and portfolio approaches, show accounting information in Iran is value relevant and value relevance of Earnings Per Share (EPS) is higher than book value of equity per share (BVP). Moreover, a comparison of the results for the periods before and after reform, based on both regression and portfolio approaches, shows a decline in value relevance of accounting information after the reform in accounting standards. It could be interpreted to mean that codification of the first national accounting standards did not improve relevancy of accounting numbers in the Tehran stock exchange. Key words: Value relevance, accounting standards, Tehran Stock Exchange, Iran, portfolio approach.

Empirical Test Of The Ohlson Model: Evidence From The Mauritian Equity Market

This study investigates the existence of value relevance of accounting information in Mauritius Stock Market using the Ohlson model (1995), which encourages the adoption of the historical price model in value relevance studies, defining value as a function of earnings and book values. Using data for the period 1998-2006, the residual earnings and clean surplus book values of thirty eight (38) companies have been computed and analysed alongside their respective quoted market prices. Results from the analysis showed that earnings and book values have value relevance in the price of shares listed on the stock exchange. The study also reveals that there is a variation with regard to value relevance of financial and non-financial firms. Keyword: Ohlson Model, Equity, Accounting Information.

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.