The Effect of the Value Relevance of Financial Reports on the Market Value of the Economic Entity (original) (raw)
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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.
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This research investigates the value relevance of accounting information, namely earnings and book value of equity (separately and aggregately), related to stock market values and stock market returns models, for Iraqi services companies for the four years 2015 - 2018. The paper finds that, related to stock market values model, the value relevance of earnings and book value has increased separately; the value relevance for earnings increased while it is irrelevant for book value when they are associated. In the other hand and related to stock market returns model, the value relevance of earnings either separately or aggregately has increased while that of book value has decreased. Generally, it is shown that earnings figures can importantly demonstrate variances in stock market values and stock market returns compared with book value figures. Moreover, the findings show that earnings and book value separately are more value relevant in stock market values model. Differently, these...
Value Relevance of Accounting Information and Share Price in Financial Service Industry
This paper examined the value reliance of accounting information in financial service companies in Nigeria. Three research questions were raised which are: what is the relationship between return on net worth and share price? to what extent does dividend per share influence share price? to what extent does cash flow from operations affect share price? To address these questions, we used data from 2012-2018 of 20 financial service companies listed in the Nigerian Stock exchange. Eviews 10 was used to analyse the data collected for this study. Least square regression method was adopted to make our statistical decisions. After conducting Hausman Test, the result indicated that random effect is more appropriate than the fixed effect model. There is positive and significant relationship between share price and firm size. We also found that there is negative and insignificant relationship between DPS, EPS, CFO, BVS and SP. The study concluded that there is relationship between share price and firm size. Also we conclude that there is no value relevance between information in financial statements and share price. The details of cash flow, dividend per share, earnings per share, book value of share and dividend per share disclosed in financial statements will not necessarily influence share price. We therefore recommend to companies to always fully disclose all the information related to their operations especially information relating to their sales revenue and assets. Also we recommend that companies should diligently follow the International Financial Reporting Standards in preparation and presentation of their financial statements.
Value Relevance of Financial Reporting: In Pre IFRS, Post IFRS and Transition Regime
JISR management and social sciences & economics
The objective of this study is to test the influence of value relevance ofaccounting information (EPS, BV, CF, ROE) on the market share value of non-financial sector of Pakistan Stock Exchange (PSX) listed firms in the Pre & Post IFRS implementation period and transition regime. The study analyses the effectiveness of the quality measures of accounting information for the future prediction of market stock price and for investors to make better decisions for future investment. The targeted population of this study is the non-financial sector of PSX. The targeted sample is based on 41 non-financial public listed companies of PSX. The sample is based on those reported companies whose data is consecutively available for 18 years from 2001 to 2018. This study period has been chosen because this period covers the Pre and Post IFRS application period of Pakistan’s firms. The panel data and Ohlson (1995) price model are applied in the study. The findings conclude that the R-Square value of ...
A study on the effect of financial reports on firms’ share value
Management Science Letters, 2014
Technology development has influenced various fields, and financial field is one of them. Applying new technologies in financial field has led to the emergence of a new kind of reporting called Internet Financial Reporting, and is used increasingly day by day due to the increasing use of internet. Adopting this kind of reporting has caused changes in the process of informing stockholders and other users. Since increasing and updating information quality can influence on decision makers to buy/sell their stock certificate, and, on the other hand, the demand for buying and selling stock certificate might influence on stock price, we aimed to evaluate the effect of internet financial reporting on the stock price of listed companies in Tehran Stock Exchange. For this purpose, a group of companies was selected as the experimental group, and some others as the control group. Then, we investigated stock price changes in both groups, and compared changes. The results indicate that internet financial reporting had no effect on the stock price in the investigated companies.
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International Journal of Business and Management, 2013
The paper examines the influence of economic factors namely foreign ownership and trading volume on the value relevance of earnings, book value and cash flows relative to three share price proxies namely average annual share price, annual closing share price and share price after a three-month period following the financial year-end (hereafter ATM-share price), after controlling company's size and leverage for Jordanian services and industrial companies within the period 2004-2009. Since the paper is the first, as the researcher believes, that examines the influence of foreign ownership and trading volume on the value relevance of earnings, book value and cash flows in an emerging exchange, it aims to provide evidence regarding the influence of these factors on the value relevance of accounting information. The paper found that the value relevance of earnings and book value is greater for companies having foreign ownership and larger trading volume. With the effect of these factors, closing share price shows more response than the other share price proxies. The findings suggest that market participants might be able to extract the firm value via these economic factors. The paper extends the valuation model by including cash flows together with earnings and book value. The findings demonstrate that there is a shift away from earnings towards book value as the basis of firm valuation.
Afro-Asian J. of Finance and Accounting, 2018
We investigate the value relevance of book value, earnings and dividends among financial and non-financial companies listed on the Ghana Stock Exchange from 2005 to 2014. For the sample of non-financial companies, book value and earnings are found to be value relevant. Dividends are only value relevant when earnings are split into dividends and retained earnings. For the sample of financial companies, only dividends and earnings are found to be value relevant. Book value is not value relevant. Largely, accounting information has greater value relevance for the sample of non-financial companies than the sample of financial companies. There is no difference in the explanatory power of the Ohlson (1995) model as compared to the two alternative models under investigation. Largely, IFRS adoptions have a significant effect on the value relevance of accounting information. The results have implications for both policy makers and investors.
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Romanian listed companies must periodically report relevant financial information useful to all investors in the decision-making process. The purpose of this study is to statistically assess the value relevance of financial information reported by Romanian companies listed on the Bucharest Stock Exchange (BSE). The study was conducted on a sample of 67 BSE companies during 2006-2012. To assess the value relevance, we analyzed the influence of the principal indicators related to financial position and performance calculated using information from annual financial statements and the growth ratio of the daily share price. Panel data analysis was used to assess monthly the value relevance of financial information. Research results show that financial information has value relevance for investors but differs significantly in time and from one firm to another.
International Journal of Economics and Finance
This study accommodates the value-relevance of accounting information based on a sample of 165 firms listed in one of the following European stock exchanged: CAC 40, BEL 20, DAX 30, FTSE MIB 40 and IBEX 35 Stock Exchanges for the period 2013-2015. This study uses information about the accounting method of recognizing the accounting value-relevance. This study applied linear analysis-regression to investigate the accounting value-relevance information on one hundred sixty-five firms during the period of three years. This study suggests that the accounting information are value-relevant on all the observed stock exchanges. Results of the study indicates that earnings per-share and book value per-share were found to partially and simultaneously affect positively the firm stock price.