Value Relevance Of Financial Information Research Articles

Value Relevance of Financial Information: Empirical Evidence from Indonesia

This research aims to analyze the factors that influence stock prices. The independent variables in this research are book value per share, dividends per share, earnings per share, operating cash flow per share, and return on assets, while the dependent variable is the stock price. The research sample used 45 (forty-five) consumer cyclical industry companies that were listed on the Indonesia Stock Exchange for the 2020-2022 period. The sampling technique used purposive sampling and the analytical method panel data regression. The results of the research explain that operating cash flow per share has a book value per share, dividends per share, and operating cash flow per share have a significant effect on stock prices, but earnings per share and return on assets have no effect on stock prices. The implication of the research that has been done is to provide direction for financial managers regarding the value relevance of financial information which can be seen from the book value per share, dividends per share, earnings per share, operating cash flow, and return on assets on stock prices. This research result is useful in the process of deciding on policies and assessing company performance. Meanwhile, the investors provide information that there is a strong relationship between financial information and stock prices.

Value relevance of financial information: A comparative study of pre- and post- implementation of Indian accounting standards

In 2016, India implemented new accounting standards, Ind AS, aligning with IFRS to increase transparency in the financial reporting of Indian companies. This study examines the value relevance of financial information in India before and after the adoption of Indian accounting standards (Ind AS) by comparing the published financial statements in pre- and post-Ind AS periods and determines the influence of financial information on the market price of shares. The study period is for twelve years, from 2011 to 2022, divided into 2011–2016 (pre-Ind AS period) and 2017–2022 (post-Ind AS period). To evaluate the value relevance of financial information, the Ohlson pricing model is employed on the panel data of the blue-chip companies listed in the Nifty 50 Index. The results from the Least Squares regression reveal that the net cash from investing activities, profit-after-tax, and book-value-per-share were relevant for investment decisions prior to the adoption of the Ind AS. In contrast, the profit-after-tax had no explanatory power during the post-Ind AS period. However, the net cash from investing activities and the book-value-per-share significantly influenced the market price of equity since the implementation of Ind AS. The value relevance of the accounting statements was superior in the pre-Ind AS period compared to the post-Ind AS.

The Effect of Readability of Annual Reports and Value Relevance of Financial Information on Agency Costs with Analyst Coverage as Moderating Variable

This study aims to determine the effect of readability based on the length of the annual report and the value relevance of the financial information on agency costs. The sample used in this study were 263 firm-year from Kompas100 index. Data were analyzed using multiple linear regression method. The result of this study indicate that the higher the number of pages, words and characters, which reflects the poor readability of the annual report, has a negative effect on the asset turnover ratio, which is an inverse proxy for agency costs. Furthermore, the presence of the analyst coverage variable is able to moderate the positive effect between the number of pages, words and characters in the annual report on the asset turnover ratio. However, no significant effect was found during both test between value relevance to asset turnover ratio and that are moderated by analyst coverage.

Classification of Equity Instruments under IFRS 9: Determinants and Consequences

AbstractOne of the main differences between International Financial Reporting Standard (IFRS) 9 Financial Instruments and International Accounting Standard (IAS) 39 Financial Instruments: Recognition and Measurement is the classification and measurement of equity instruments that are financial assets. Under IFRS 9, a firm must measure acquired equity instruments at fair value through profit or loss (FVPL) unless the firm irrevocably chooses at initial recognition to measure those assets at fair value through other comprehensive income (FVOCI). In this case, a firm must recognise all changes in FVOCI without the possibility of reclassifying these amounts into profit or loss. In this context, this study has two main objectives. First, it examines the frequency of firms that elect to classify equity instruments as FVOCI in the first year of IFRS 9 adoption and identifies the determinants of the decision to classify equity instruments as available for sale (AFS) (under IAS 39) or as financial assets at FVOCI (under IFRS 9). Second, it considers whether this choice has any influence on the value relevance of financial information. The results of a sample based on firms in the FTSE 100 and EURO STOXX 50 show that risk is the main determinant of the reclassification from AFS to FVOCI in the first year of IFRS 9 adoption, while the level of variable compensation for CEOs (for AFS) and the level of fair value hierarchy (for AFS and FVOCI) are the main determinants for the classification of equity instruments. Regarding the consequences of this change, the findings indicate that the prohibition of recycling for the FVOCI option under IFRS 9 leads investors to pay more attention to the changes in fair value as recognised in OCI.

Value Relevance of Financial Information in Malaysian Listed Firms: Real Earnings Management’s Perspective


 
 
 
 Purpose: This study investigates the value relevance of financial information i.e., earnings (EPS), the book value of equity (BVE), and cash flow from operations (CFO). The study further investigates the influence of real EPS management (REM) on the value relevance of financial information because firms are now switching toward real earnings management rather than accrual-based earnings management (ABEM).
 Methodology: A sample of 250 public listed companies was used to test the hypotheses over the period 2014-2018. Using Driscoll-Kraay regression.
 Findings: This study finds that earnings, the book value of equity, and cash flow from operations are value relevant, and real earnings management moderates the value relevance of EPS, book value of equity, and cash flow from operations.
 Implications: This study has specific policy implications for regulators to push auditors to detect real earnings management to improve the value relevance of financial information.
 
 
 

Does Multiple Capitals Disclosure Affect the Capital Market? An Empirical Analysis in an Integrated Reporting Perspective.

Integrated reporting (IR), as a novel corporate reporting approach, focuses on how six forms of capital promote corporate value. This paper explores whether this kind of multiple capitals disclosure (MCD) framework has an impact on the capital market. Using a sample of Chinese A-share firms from 2012 to 2016, we examine the relationship between MCD quality and firm value. The results indicate that a higher MCD quality leads to a greater firm value. Our results are robust to a variety of sensitivity tests. Further evidence suggests that MCD quality could increase profitability by affecting the decision-making of non-financial stakeholders and enhance the value relevance of financial information by affecting the decision-making of investors. The paper helps understand how the IR approach affects the perception of investors on the value of a firm. The findings of the paper are of interest to academics, corporate management, investors, and governmental officials.

Board composition and value relevance of Ghanaian firms: a seemingly unrelated regression approach

PurposeThe purpose of this study is to examine the connection between board composition and value relevance of financial information in Ghana.Design/methodology/approachThe study uses a panel data of 144 firm-year observations of listed firms in Ghana.FindingsThe study finds that a higher fraction of independent directors is associated with lower firm value. The study further finds that board size is positively related to firm value, whereas duality is negatively associated with firm value.Practical implicationsThe practical implication of this paper is that investors and regulators should be mindful that specifying governance composition should not only be based on “so-called” codes of best practices but also the level of the country's or the sector's development and local institutional structures.Originality/valueThis study uses five different measurements of market share and considers the impact of the provision of the Code of Best Practices in Ghana.

Measuring the Value Relevance of Financial Information for Strategic Decision-Making and Performance of Nigerian Listed Firms

Purpose of the article: Management has traditionally used financial information for strategic decision-making. This study investigates the value relevance of financial information contained in earnings per share and operating cash flow per share for strategic decision-making and hence performance. It utilized secondary data extracted from annual reports and accounts of fortythree (43) listed firms on the Nigerian Stock Exchange over the period of 2006–2017. Methodology/methods: The collected data were subjected to analysis using the non-linear symmetric Generalized Autoregressive Conditional Heteroscedasticity (GARCH (1 1)) model, which is capable of handling time varying properties of financial time series to measure the statistical significance of the association between the variables of interest. Scientific aim: The paper is aimed at empirically investigating the value relevance of financial information to ascertain its potency for handling strategic decisions of listed firms in Nigeria. This is to digress from the contextual factors in the decision-making process and construct an integrated link between value relevance research and strategic management. Findings: The study found that earnings per share and operating cash flow per share are individually and jointly value relevant in strategic decisions and performance. Conclusion: It is necessary to pay attention to the financial information system of an organization to enhance the quality of services it can provide to strategic management. It is necessary to pursue the fundamental quality of relevance that guarantees predictive, materiality and confirmatory values and enhancing quality that measures usefulness by both management and regulators.

Comparative Study of Value Relevance of Financial Information in the Oil and Gas and Manufacturing Sectors in Nigeria

This paper conducted a comparative study on the value relevance of accounting information in the Oil and Gas and manufacturing sector using five quoted companies which were randomly selected from each of these sectors. Data were collected on the Market Price per Share, Earning per Share and Book Value of Equity for the period 2014 to 2018 from the annual financial reports of the selected companies. We hypothesized that Value relevance in the oil sector do not have more significant effect on the earnings per share in the manufacturing sector and, also that Value relevance in the oil sector do not have more significant effect on the market price per share in the industrial sector. We regress book value of equity on both market price per share and earnings per share on the two sectors under consideration using simple linear regression techniques. The regression results revealed that accounting information of the companies in the industrial sector is more relevant compared to the financial information disclosed by companies in the Oil and Gas sector. The study recommends that the regulators of the market should carry out yearly Cross-sectional studies to ascertain the trend and include this comparison requirement as one of the yardsticks of measuring performance. Keywords: value relevance, earnings per share, book value of equity DOI: 10.7176/RJFA/11-12-03 Publication date: June 30th 2020

Factors Affecting the Value-Relevance of Capitalized Exploration and Evaluation Expenditures Under IFRS 6

This study examines factors affecting the value-relevance of financial and nonfinancial disclosure in the context of the long contentious International Financial Reporting Standard 6 (IFRS 6). Relative to the capitalization of R&D expenditures, IFRS 6 follows a far less restrictive approach, delaying the requirement for probable future economic benefits in settings of high uncertainty. We compare the value-relevance of this asset with that of nonfinancial information commonly reported by mining firms, namely mineral resource estimates. We report evidence that investors utilize nonfinancial information to assess the value-relevance of financial information, initially focusing on whichever information is timelier. We do not find evidence that investors prefer conservative reporting practices in a setting with high uncertainty; rather we provide evidence that investors interpret the capitalization decision as a signal of project viability. This finding is of particular relevance to the ongoing Intangible Assets project being conducted by the International Accounting Standards Board (IASB). JEL classifications: G12, G14

IFRS adoption, value relevance and conditional conservatism: evidence from China

PurposeThis study sought to evaluate the relationship between value relevance of financial information and conditional conservatism of non-financial companies listed in China.Design/methodology/approachUsing panel data comprising of 28,723 firm years, the authors determine the value relevance of financial information before and after mandatory International Financial Reporting Standards (IFRS) adoption while incorporating the relationship with conditional conservatism. The authors further examined how this relationship varies between state and non-state owned companies.FindingsConditional conservatism is positively (negatively) related to value relevance prior (post) to mandatory IFRS adoption while it makes no difference as to whether a company is state or non-state owned, as IFRS has a positive and significant effect on value relevance. Conservatism, on the other hand, has a negative and insignificant relationship with market value of both state and non-state owned firms during the pre- and post-IFRS period.Originality/valueBy exploring an emerging economy, the authors provide evidence on the variations in value relevance amongst state and non-state owned firms. In particular, the authors establish the positive effect of IFRS on the value relevance of non-state firms as compared to state-owned institutions.

Pension plans assumptions: the case of discount rate

Purpose In 2009, the International Accounting Standards Board started revising International Accounting Standard (IAS) 19 to improve the requirements for managing the annual expense of a pension plan. The revised standard became effective in 2013. The purpose of this paper is to investigate what effect this revision had on managerial discretion. The paper also examines the implications of the revision on the value relevance of accounting information. Design/methodology/approach The authors use a sample of 72 firms listed on the FTSE 100 that have defined benefit plans for the period between 2009 and 2015. The authors use a regression discontinuity design to analyse the effect from the revision of IAS 19 on the choice of managers regarding the expected rate of return-on-plan assets. The paper also investigates whether firms with higher pension sensitivity are more likely to manage earnings upward before the revision of IAS 19. Further, the paper studies the value relevance of earnings after the revision of the accounting standard. Findings Consistent with predictions, the results show that the adoption of the revised IAS 19 limits the use of the expected rate of return on assets to manage the annual expense of defined benefit plans. This finding shows a sharp increase in the value relevance of earnings. Practical implications This finding is useful for users and preparers of financial statements and regulatory bodies as it identifies not only the influence of a change in the accounting standard for earnings management but also provides evidence on the consequences of managers’ discretion. Originality/value This paper provides direct evidence on the relationship between regulation and financial reporting discretion. It also provides evidence to accounting standard setters that the revision of IAS 19 improves the value relevance of financial information, which gives additional justification to the changes introduced by regulators.

Perbedaan Kinerja Keuangan Dan Relevansi Nilai Sebelum Dan Sesudah Penerapan Konvergensi Psak Ke Ifrs Studi Pada Perusahaan Non Keuangan Yang Terdaftar Di Bursa Efek Indonesia

The purpose of this study to examine whether there are differences in the increase or decrease the impact of the third application of IFRS adoption of SFAS IA1 has issued the applicable date of January 1, 2008, the PSAK 13 on Investment Property, PSAK 16 on Fixed Assets, and PSAK 30 of the Lease, the companies are already applying IAS adoption. Tests conducted on the influence of the application of the convegence offinancial performance, as seen from the company's size, activity, Solvency, Growth, Profitability, and Investment Company performance. And Testing the influence of convergence on the value relevance of financial information of the relevance value of the company seen net income and equity book value to price shares of the company. Thesis inconnection with GAAP to IFRS convergence series launched by IAI in 2008. The research was carried out on non-financial companies listed on the Stock Exchange Indonesia (BEI) and using secondary data derived from the financial report and the Indonesian Capital Market Directory (ICMD) in the period 2006-2010. Authors obtain the 36 companies selected as the study sample.

Earnings Management and Value Relevance in Nigeria: A Pre and Post Ifrs Analysis

The purpose of this article is to analyse the literature concerning legal framework for outer space activities by states. Review was conducted on the elements of national space law, including literature critiquing particular strengths or weaknesses of existing laws and literature, on the obligations placed on States under international law and on why writers make particular recommendations as to the content of legislation. The article will summarise the key elements one would anticipate finding in the outer space regulatory framework and which will form the structure of the analytical framework when considering how States implement international space law in practice. In recent times, the issue of earnings management and value relevance has caused financial reports to come under scrutiny. With the introduction of the International Financial Reporting Standards (IFRS), a lot of studies have been carried out to see what kind of effect it has on key financial variables such as earnings management and value relevance of firms. Therefore, this study, “Earnings Management and Value Relevance in Nigeria: A Pre and Post IFRS Analysis”, examined the impact of IFRS on Earnings Management and Value Relevance of financial information in Non-Financial Companies quoted in the Nigerian Stock Exchange (NSE). Data gathered are from the financial statements and annual reports of 60 Companies from the Non-Financial Sector of the Nigeria Stock Exchange because companies in the financial sector are not overall amendable to accruals model. The empirical study covered the period from 2007 to 2016 statistical and econometric tools such as Panel data regression and paired samples tests. The results revealed an increase in value relevance, and a decrease in earnings management in the Post-IFRS era. Thus, we infer that earnings management level has decreased while value relevance has increased since IFRS adoption. This study therefore recommends that the relevant regulatory bodies should be empowered by the government to enable the formulation of effective measures and policies that check earnings management practices, and foster value relevance of the financial information presented in the annual reports and accounts of Nigerian companies.

International Financial Reporting Standards Adoption and Value Relevance of Financial Information of Quoted Healthcare Firms in Nigeria

International Financial Reporting Standards (IFRS) was first adopted in 2005 by European Union countries while Nigeria mandatorily adopted in 2012 to participate in opportunities offered by globalization. This study, therefore, investigated the impact of IFRS adoption on the value relevance of financial information of quoted Healthcare Firms in Nigeria. The study conducted a pre (2008-2011) and post (2012-2015) IFRS analyses on six Healthcare firms quoted on the Nigeria Stock Exchange. The study sourced data on Earnings per Share (EPS), Change in Earnings per Share (CEPS), Book Value per Share (BVPS) and Share Price (SP) from published annual reports of the quoted Healthcare firms and Cashcraft Asset Management. Using the Multiple regression model the study revealed that Pre- IFRS financial information is value relevant; Post-IFRS financial information is also value relevant; and Post-IFRS financial information has relative value relevance over Pre- IFRS financial information.

Value Relevance and Users Confidence in Post International Financial Reporting Standards Adoption Era of Nigerian Banks

Conclusions from the existing studies on IFRS adoption and value relevance were characterized by conflicting results and mixed findings. This study attempts to evaluate the impact of adoption of International Financial Reporting Standards (IFRS) on the value relevance of financial information of Nigerian Deposit Money Banks. A mixed research approach was adopted for this study. To analyze the secondary data correlational research design was employed using Edward, Bells and Olhson (EBO) model. Primary data through structured questionnaire administered on a sample of 200 randomly selected preparers and users of banks financial statements was also used to provide alternative evidence. Data were analyzed using descriptive and econometric approaches. General least square (GLS) multiple regression analyses were employed to analyze the panel data based on random effect model using SPSS 17 statistical tool.The results from data analysis showed r calculated of 0.69 indicating a significant relationship between adoption of IFRS variables and value relevance indexes in the NDMBs, from the analysis of questionnaire responses. The relationship, using EBO model, between the variables used for post IFRS adoption analysis shows that share price (SP) is positively correlated with earning per share (EPS), change in earnings per share (CEPS) and book value per share (BVPS) at 0.368, 0.096 and 0.103 respectively meaning that SP and EPS have higher positive relationship but lower with CEPS and BVPS. Invariably, higher earnings attract higher SP which automatically enhances the confidence of investors in the financial statements after the adoption. The pre-IFRS R-squared is 0.35 while post-IFRS R-squared is 0.16 showing that post IFRS financial information has a weak value relevance. However, the elements that made up financial information are not value relevant in post IFRS adoption thereby giving a low cumulative relationship to share price. The study suggests concerted efforts by banks to strengthen the value relevance and improve users’ confidence of their financial reports since IFRS adoption has been made mandatory.

Value relevance of voluntary internal control certification: An information asymmetry perspective

Internal control certification reduces information uncertainty on the quality of controls and therefore is expected to affect the pricing of equity securities. This study investigates whether chief executive officers’ (CEOs) and chief financial officers’ (CFOs) voluntary certification of internal controls over financial reporting (ICFR) is value relevant. Using a sample of firms from a unique Australian ICFR reporting environment, the study finds that voluntary ICFR certification is positively associated with share price. Moreover, the financial information of ICFR certification firms is significantly associated with the share price if they have higher price volatility, bid-ask spread and analysts’ forecast dispersion, suggesting ICFR certification has an incremental effect on the value relevance of financial information for firms operating within a weak information environment. Results from the returns model, the change model and differences in the R2 support that ICFR certification is useful to investors. The study informs on the value relevance of ICFR reporting outside the United States.

International Financial Reporting Standards and Value Relevance of Financial Information: An Empirical Evaluation of Selected Nigerian Listed Companies


 This study investigates the International Financial Reporting Standards (IFRS) and value relevance of financial information among Nigerian listed companies after the adoption of IFRS. 77 sample companies were randomly selected from the population. Data were collected from UUM-Data stream through the annual reports and accounts of companies, which consist of Stock price (dependent variable), Book value of equity and net income as (independent variables) for the year 2016. Ordinary Least Square Regression was the method used in analyzing the variables. The regression result revealed that there is a positive and significant relationship between book value of equity and net income on stock price. These reveal that the financial information of listed companies in Nigeria is more value relevant after the adoption of IFRS. In view of the findings, the study recommends that, Nigerian Stock Exchange should ensure that all listed companies are comply with the accounting framework issued by IFRS, in order to have full disclosure of their financial information.

Effect of information quality due accounting regulatory changes: Applied case to Mexican real sector

The purpose of this paper is to examine whether changes in accounting standards improve value relevance of financial information on listed companies in Mexico. The research was conducted for the period 2000–2013 using a sample of 141 companies that report to the Mexican stock exchange using the methodology of panel data. Our findings show that changes in local regulations (generally accepted accounting principles) to internationally approved standards (Financial Reporting Standards and International Financial Reporting Standards) increase the value relevance and therefore the quality of information. The study shows that the accounting information with international Financial Reporting Standards is more trustworthy for foreign and national investors.

Converting financial statements: operating to capitalised leases

PurposeThe purpose of this paper is to examine how capitalising operating leases under IFRS 16/AASB 16 affects the financial statements and value relevance of financial information. In doing so, limitations of exiting methods are highlighted and improved upon.Design/methodology/approachImhoff et al.’s (1991) constructive method for capitalising operating leases is improved upon and used to restate the financial statements of 165 S&P/ASX200 companies. The financial position, key ratios and value relevance are tested for significant differences.FindingsThe results provide evidence that capitalising operating leases affects financial statements and value relevance.Originality/valueImhoff et al.’s (1991) constructive method has been refined, providing an improved method for capitalising operating leases than the one that has been used in the past. From a practical perspective, this research provides evidence supporting the “right-of-use” method proposed by the IASB which will see previous off-balance-sheet leases recognised.