Value Relevance Of Financial Statements Research Articles

Board characteristics and accounting value relevance: Insights from Saudi Arabia

This study aims to determine the extent to which corporate governance affects the usefulness of financial information available to investors in Saudi Arabia. The research investigates the impact of board characteristics—including independence, size, and frequency of meetings—on the value relevance of financial statements. Data from 125 non-financial firms from 2018 to 2022 were analyzed. The results indicate that increases in both book value per share (BVPS) and earnings per share (EPS) significantly enhance share prices. Furthermore, board independence, size, and meeting frequency amplify the value relevance of EPS but not BVPS, highlighting the complementary role of these governance attributes in equity valuation. High-quality governance and financial reporting are crucial for accurate evaluation of financial statements, enabling investors to perform more precise equity valuations. This underscores the importance of robust corporate governance structures. These insights are valuable for regulators, firms, and investors. Regulators can use these findings to strengthen corporate governance frameworks, ensuring boards are independent, well-sized, and diligent, thereby enhancing financial transparency. Firms can improve their governance practices, boosting the credibility and usefulness of their financial reports, which fosters greater market trust and attracts investment. Investors benefit from more reliable financial information, allowing for better-informed decisions and more precise equity valuations.

Exploring the Influence of Earnings Management on the Value Relevance of Financial Statements: Evidence from the Bucharest Stock Exchange

Exploring the Influence of Earnings Management on the Value Relevance of Financial Statements: Evidence from the Bucharest Stock Exchange

Examining the value relevance of financial statements in European countries: the importance of legal origins on cross listing decisions

Examining the value relevance of financial statements in European countries: the importance of legal origins on cross listing decisions

Examining the value relevance of financial statements in European countries: the importance of legal origins on cross listing decisions.

Examining the value relevance of financial statements in European countries: the importance of legal origins on cross listing decisions.

Impact of IFRS Adoption on Financial Statements Value Relevance. A Study of Eastern vs. Western European Countries

Abstract The implementation of IFRS has been a significant milestone in the accounting field, sparking debates among advocates and critics regarding whether the initial objectives were actually achieved in practice. This paper aims to investigate whether the adoption of IFRS has led to an increase in the value relevance of financial statements in both Eastern and Western European countries. The study takes an empirical approach, analyzing companies before and after the adoption of IFRS, and introduces contemporary concepts that can contribute to future research. Policymakers rely on evidence-based policies and often seek impartial and reliable evidence from academic researchers. Given the extensive body of research conducted thus far, this paper seeks to further emphasize the positive impact of IFRS implementation.

Keputusan Investasi dan Keputusan Pendanaan Terhadap Nilai Perusahaan Dengan Ukuran Perusahaan Sebagai Variabel Moderasi

This study aims to provide an empirical explanation of the Influence of Investment Decision and Funding Decisions on Firm Value with Firm Size as a Moderating Variable in Consumer Goods Companies. The research method used in this study is a quantitative descriptive research approach. The samples in this study are 25 Consumer Goods Companies that are listed on the Indonesia Stock Exchange for 2019-2021. The date werw then analyzed using multiple regression analysis and moderated regression analysis (MRA). By using SPSS 25 software. The result showed that the investment decision variable had a negative and significant effect on firm value, while the funding decision variable had a negative and significant effect on firm value. Then fpr the company size variable it is able to strengthen the investment decision variables and funding decisions on firm value. The company is expected to provide benefits for the company’s management to increase the value of the company in the future. Investors are expected to minimize risk in investing. For future researchers, it is hoped that they can add other variables that might better predict the value relevance of financial statements

Pengaruh Persentase Saham Dan Akuntansi Konservatisme Terhadap Relevansi Nilai Laporan Keuangan Dengan Kualitas Laba Sebagai Variabel Moderasi

This study aims to determine the effect of share percentage, accounting conservatism, the interaction of earnings quality and share percentage on value relevance and the interaction of earnings quality and accounting conservatism on value relevance in manufacturing companies listed on the Indonesia Stock Exchange in 2019-2021. The number of manufacturing companies used as samples in this study were 96 companies after going through the purposive sampling method. The results showed that partially the variable percentage of shares has no effect on value relevance, accounting conservatism has no effect on value relevance, earnings quality interactions are proven to be unable to moderate the relationship between share percentage to value relevance and earnings quality interactions are proven to be unable to moderate the relationship between accounting conservatism and relevance. Companies are expected to see the importance of other factors that can increase the relevance of the value of financial statements optimally. For investors, it is hoped that this can be used as input in making investment decisions in the future, before deciding to invest in the company. For further research, it is hoped that by adding other variables that might be able to predict the value relevance of financial statements even better.

The Effect of COVID-19 on the Value Relevance of European Firms’ Financial Statements

The main topic of this study was the value relevance of accounting information. It employed a sample of 1,645 companies listed on the stock exchanges of the top six European Economies (in terms of GDP) – France, Germany, Italy, the Netherlands, Spain and the United Kingdom – for the period 2010-2020. The study’s analysis was based on the Ohlson model and used linear regression. The paper examines the difference between these countries in terms of value relevance. In addition, the paper examines the effects that the Covid-19 pandemic outbreak had on the value relevance of financial statements. The purpose is to examine how investors have been affected by the pandemic and the influence it has had on the importance of financial statements and specific accounting variables. Furthermore, we compare the importance of the two most significant accounting variables, earnings and book value (equity) before and after the pandemic. The results suggest that the explanatory power of financial statements is almost the same for all countries, except Germany, where it is significantly higher. The explanatory power of financial statements decreased in all countries after the start of the pandemic. Moreover, in most countries, earnings seem to have lost value relevance compared with book value due to the financial crisis.

Value relevance and changes in accounting standards: A review of the IFRS adoption literature

Share prices reflect available financial information about those firms and a substantial amount of these information come from financial statement figures. The informativeness of the reported earnings and book values in financial statements depend on accounting standards that govern their preparation, thus accounting standards could influence the informativeness of financial statement figures as well as the degree to which investors consider these figures in making investment decision. This relevance of accounting figures to investors is referred to in existing literature as value relevance. This study investigated the relationship between value relevance and the adoption of International Financial Reporting Standards (IFRS). Most pioneer studies on value relevance and changes in accounting standards discovered a decline in the value relevance of financial statements in the US while most of the reviewed studies that address IFRS specifically discovered an increase in value relevance in the respective markets after adoption of IFRS. A few studies also reported a lack in improvement of value relevance following IFRS adoption but attributed the results to anomalies like government interference, mock compliance, improper enforcement, firm-specific differences and business changes that are outside the scope of financial reporting. The study recommended the adoption of IFRS standards as a possible factor that can improve value relevance.

The Value Relevance of Financial Statements and Stock Price Returns: With Reference to the Companies at Colombo Stock Exchange

The South Asian Journal of Finance is an international open access and double-blind peer reviewed journal focusing on the areas of finance in South Asian region. It is published bi-annually (June and December).

Asymmetric financial reporting quality and firm size: conditional evidence from an emerging market

PurposeThe mandatory adoption/convergence of IFRS has increased the information quality of reported earnings in equity markets across the globe. The purpose of the study is to explore whether the mandatory convergence of Indian Accounting Standards (Ind AS) with International Financial Reporting Standards (IFRS) affect the financial reporting quality of listed firms in India.Design/methodology/approachThe sample includes 355 non-financial publicly listed firms on National Stock Exchange (NSE) of India with 1,065 firm-year observations. The authors use models similar to Jones (1991), and DeFond and Jiambalvo (1994) to investigate value relevance in the period “1st January 2017 to 31st December 2019”. The study uses the quantile regression (QR) analysis to verify our hypothesis.FindingsThe findings suggest that IFRS convergence process adds value to accounting quality of reported earnings in Indian stock market. The authors' QR estimations produce collaborating evidence on the uneven impact of IFRS across quantiles and the financial reporting quality skewed in favour of investors of high-valued firms.Research limitations/implicationsThe effects of convergence with IFRS in value relevance of financial statements could be reinforced by considering alternate accrual models and incorporating more accounting measures on an expanded sample of stocks from several global markets.Practical implicationsPresently, convergence of local accounting standards to IFRS in India is only partial. The findings may produce useful insights for regulators and standard setters to further increase the value relevance of financial reports whilst they move towards full convergence.Originality/valueThe study explores the information quality of reported earnings of Indian listed firms in post-IFRS convergence period, which is not properly investigated in the literature. Moreover, the research is unique in terms of applying QR estimations to examine the value relevance of IFRS-converged financial reporting from the emerging market perspective.

“High Tech And Low Tech” Industries as Moderating The Value Relevance of Accounting Information Research and Development (R&D) Costs

Accounting information contained in financial statements must be able to influence the decision making of users (investors). The concept of value relevance of financial statements developed by Ohlson (1995) emerged, namely how big the role of accounting information in influencing investor decision making which in turn affects stock prices. Information on the R&D costs of companies belonging to high tech industries may be priced higher than companies belonging to low tech industries. So it is expected that the relevance of information on the R&D costs of companies belonging to high tech industries is higher than companies belonging to low tech industries. This study aims to examine the value relevance of research and development (R&D) cost accounting information and to examine the value relevance of research and development (R&D) accounting information for companies belonging to high tech industries, which are higher than companies belonging to low tech industries. The population in this study were all companies listed on the Indonesia Stock Exchange in 2015-2017. The sampling technique used purposive sampling with company criteria that revealed research and development (R&D) costs in 2015-2017. The number of companies that meet the sample criteria are 47. Data analysis in this study uses Partial Least Square (PLS) with Warp PLS 6.0 application. The results of this study prove that research and development (R&D) accounting information has a positive and significant effect on firm value. However, the results of the study failed to prove that the value relevance of research and development (R&D) accounting information for companies included in high tech industries was higher than companies included in low tech industries.

Quality and Value Relevance of Financial Statements: Improving Sustainability Reporting

The aim of this study was to examine the effect of the quality of financial statements and the value of relevance in financial statements on Sustainability Reporting. The study was conducted on winner companies based on categories from the National Center for Sustainability Reporting and the Indonesia Stock Exchange listed organizations between the years 2016 - 2018. Analysis of research using partial least square. The results showed that financial reporting quality which is proxied by conservatism accounting has an effect on sustainability reporting on social and environmental aspects, while on economic aspects it has no effect. Value relevance of financial statement using earnings per share on sustainability reporting, value relevance of financial statements using book value per share has no effect on aspects of social performance of sustainability reporting.

Financial Statement Adequacy and Firms’ MD&A Disclosures

Firms are required to provide financial information via the financial statements and the MD&A—a narrative explanation of the financial statements. Our study examines how firms use the MD&A channel when their financial statement channel is inadequate. We proxy for the adequacy of the financial statement channel by the value relevance of book value and earnings. We use several approaches to extract MD&A disclosure attributes: (1) keyword searches to identify non-GAAP disclosure, (2) supervised deep learning models to identify forward-looking statements, and (3) unsupervised topic models as well as text segmentation techniques to identify topics and topic locations. We find that firms with lower value relevance of financial statements (1) are more likely to provide non-GAAP disclosure in the MD&A, (2) include more forward-looking statements in the MD&A, and (3) use larger proportions of the MD&A to discuss intangibles and discuss them more prominently. Our findings suggest that managers use the MD&A, a relatively more flexible channel, to a greater extent to provide information when their financial statement channel is less adequate.

Accounting comparability and the value relevance of earnings and book value

AbstractThe value relevance of financial statements is of great significance to investors and standard setters. The present research examines whether accounting comparability among industry peers enhances the value relevance of earnings and book value. This is an important question because both the Financial Accounting Standards Board and the Securities Exchange Commission seek greater comparability in financial reporting. However, there is limited empirical evidence on how comparability affects the value relevance of accounting information in the United States. Our results show that accounting comparability increases the value relevance of earnings, but not book value. That is, when firms exhibit greater accounting comparability vis‐à‐vis industry peers, investors attach higher value to reported earnings. In terms of economic significance, the value relevance of earnings is 25.2% higher when accounting comparability is higher by one standard deviation. However, the incremental benefits of accounting comparability are attenuated when financial reporting opacity is high or when there exists an internal control material weakness over financial reporting. In contrast, comparability benefits are enhanced when an industry specialist auditor is employed. Our results are robust to using different model specifications.

Does the Impact of Converging with IFRS, by Pharmaceuticals Companies in India, Influence Their Stock Market Performance?

The paper examined the impact of converging with IFRS, on stock market performance of 12 pharmaceuticals companies listed in S&P BSE 100. The time frame of six years from 2013 to 2018 was selected and Ordinary Least Square (OLS) regression model was used for the analysis. The result revealed that the value relevance of financial statements was high on converging with IFRS. The impact of financial statement variables on Indian Stock Market was significantly positive with reference to PAT. However, all financial variables did show significant association with stock market indicators.

Have accounting measures lost their usefulness after the 2008 global financial crisis?

Purpose This purpose of this paper is to investigate the value relevance and incremental importance of earnings and book value in the Kuwaiti market to equity holders over time and in the context of the decade after the 2008 global financial crisis. Design/methodology/approach Following reports in the literature, the value relevance of earnings and book values was examined using the price valuation model provided by Ohlson (1995). Observations (2,817) were collected from all firms listed on the Kuwait Stock Exchange from 1994 to 2016. Findings The results suggest that the value relevance of earnings and book values declined over this period, and that the loss of value relevance for earnings data was greater than that for book value. The analysis provides evidence that the decline in value relevance of earnings and book value was driven by book values in the post-GFC period and suggests an exchange of value relevance between earning and book value post GFC. Practical implications The results are useful for regulators, analysts, investors and academics as an assessment of effectiveness of current financial reporting. There is a need for improvement because quality information helps equity holders determine value precisely. Timely financial reporting may mitigate the drop in value relevance of financial statements. Originality/value This is the first study to examine value relevance accounting measures of Kuwaiti companies, in the post-GFC context. It contributes to capital market research through an empirical examination of a frontier capital market.

Accounting Standards and the Value Relevance of Financial Statements

Using the data of 68 Malaysian listed firms, this study attempts to examine the relationship between accounting standards and the value relevance of financial statements. It also explores the difference in accounting treatment between accruals accounting and cash accounting, and evidence of supplies. This process confirmed that accruals accounting provided a more transparent picture of accounting information when compared with cash accounting aspect. Our findings are quite consistent with our hypothesis which clearly states that in economies wherein strong and secure protection mechanisms for shareholders exist, tend to apply the use of accruals accounting with confidence, assuming that the value relevance of accounting information would not be compromised at any stage.

English

This paper aims to analyze the value relevance of financial statements prepared according to International Accounting Standards (IAS)/International Financial Reporting Standards (IFRS). The study focuses on two of the different sets of accounts presented by companies: the parent company financial statement and the consolidated version. We have developed a panel data from a sample of Italian listed companies by collecting accounting figures from consolidated and separate financial statements, since Italy mandates listed companies to prepare both reports according to IAS/IFRS. Using an Ohlson price model, we have tested our hypotheses, performing regressions of share price or market capitalization on book value and earning. Firstly, we compared the consolidated financial reports’ value relevance with that of the separate financial statements. The evidence suggests that, although the separate reports also have a high value relevance, this does not provide investors with additional information. Secondly, we investigated the value relevance of the consolidated financial statements alone, by focusing on the specific nature of the group’s equity book value and net income. Both are made up of two components: one referring to the parent company and the other attributable to non-controlling interests (NCI) as a consequence of the presence of minority shareholders within the group. We analyzed the value relevance of group financial statements, taking into account the presence/absence of minority shareholders and their portion of equity and net income. By dividing groups with minority shareholders from groups without these, we verified whether the presence of non-controlling interests can affect the value relevance of consolidated reports, and whether NCI equity and net income are value-relevant. In fact, all modes used to test value relevance are based only on the parent company equity and net income, leaving aside that group equity and net income are divided into two parts. The evidence suggests that NCI financial values slightly increase the fit of the model, and that NCI equity and net income are statistically significant in affecting the market capitalization of companies. Key words: International Accounting Standards (IAS)/International Financial Reporting Standards (IFRS), value relevance, equity, accounting.

Sustainability Reporting and Value Relevance of Financial Statements

This study examines whether information about the winners of the Sustainability Reporting Award (SRA) contributes to the usefulness of the information in financial statements. This study used a sample consisting of 110 winners of SRA (SRA firms) and 110 companies that did not receive SRA (non-SRA firms) from 2008 to 2016. The study found that earnings per share (EPS), earnings per share change (EPSC), and book value per share (BVPS) are value-relevant information. Results of comparison between SRA firms and non-SRA firms show that the positive association between EPS and stock price (P) and the positive association of EPS with stock returns (R) for SRA firms are higher than that for the non-SRA firms. In addition, findings of this study indicate that EPSC is positively associated with R when EPSC and R are measured by Indonesian rupiah (IDR) instead of by percentage, and the positive association between EPSC and R for the SRA firms is higher than that for the non-SRA firms. Thus, the results are sensitive to measures of the variables. However, this study found that value relevance of BVPS for SRA firms is lower than for non-SRA firms. Implication of this study is that information about the winners of SRA contributes to the usefulness of financial statements, especially the information of EPS and EPSC.