The present study analyses the combined, individual, and incremental value relevance of accounting information produced by firms listed on the S&P BSE-500 for FY-2006 to FY-2010, and changes therein over a period of time. Results provide sufficient evidence that accounting information is value relevant for BSE-listed firms. The combined value relevance of accounting information represented by earnings per share and book value per share has declined while there have been insignificant changes in the incremental value relevance of accounting information.

http://www.ijsrp.org/research-paper-1014/ijsrp-p3462.pdf

Value Relevance of Accounting Information: An Empirical Study of Selected Indian Firms

Earnings and book value are commonly used as the basis for firm valuation. However, the reliability of earnings which affected by earnings management may affect accounting informations’ relevance in determining firm value. This thesis investigates the link between earnings management and firm valuation by assessing the impact of earnings management on the value-relevance of earnings and book value. This study estimates discretionary accruals using the Modified Jones model with ROA (Kothari, 2005) as earning management proxy. The population in this research is manufacturing companies listed on Indonesia Stock Exchange 2009-2011 period. Samples are selected using Purposive Sampling Method. From samples selection, 108 indicated earnings management firms (higghest discretionary accruals) and 108 non-indicated earnings management firms (lowest discretionary accruals) are obtained. Hypothesis 1 test result shows that earnings and book value affect stock price. It proves that earnings and book value are value relevant. Hypothesis 2 test result shows that earnings management reduces the value-relevance of earnings and book value. It is due to the decrease of accounting information reliability. This link between the integrity of accounting information and its usefulness to market participants supports the need for ongoing regulatory activity and management policy as well as educational program to improve the integrity of financial reporting process. Keyword: earnings management, discretionary accrual, value-relevance, earnings, book value, stock price

https://jimfeb.ub.ac.id/index.php/jimfeb/article/download/280/228

The effect of earnings management on the value relevance of earnings and book value

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.

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The value relevance of earning measurement using ohlson model: a meta-analysis

Risk sentiment and firms’ liquidity in the French market

EnglishThe relevance of accounting information is one of the accounting guiding principles. Knowing that value creation is one of the main objectives of the company, this study sought to identify the most relevant financial indicators for discriminating companies that create value in the Brazilian electricity sector. We used a sample of 52 companies listed on the BM&FBOVESPA, totaling 385 annual statements. The results indicate that there was value generation in 41.82% of cases. In addition, they point four indicators as most relevant: return on equity, bank debt composition, financial independence and composition of debt. portuguesA relevância da informacao contabil e um dos principios que norteia a Contabilidade. Sabendo-se que a criacao de valor e um dos principais objetivos da empresa, este trabalho buscou identificar os indicadores contabeis mais relevantes para discriminar as companhias criadoras de valor no setor de energia eletrica brasileiro. Foi utilizada uma amostra de 52 empresas com acoes negociadas na BM&FBOVESPA, totalizando 385 Balancos Anuais. Os resultados indicam que houve geracao de valor em 41,82% dos casos. Alem disso, apontam quatro indicadores como mais relevantes: retorno sobre o patrimonio liquido, composicao do endividamento bancario, independencia financeira e composicao do endividamento.

/pdf/a-relevancia-da-informacao-contabil-na-identificacao-de-3z5bnuptgr.pdf

A relevância da informação contábil na identificação de empresas criadoras de valor: um estudo do setor de energia elétrica brasileiro

Purpose – India is one of the few countries where companies are required to give both consolidated financial statements (CFS) as well as parent‐only financial statements. While parent‐only statements have been in existence for a long time, CFS was introduced recently. The purpose of this paper is to examine the value relevance of CFS in India.Design/methodology/approach – The value relevance of CFS is examined through an empirical study. The study examines the relationship between market values and consolidated earnings and parent‐only earnings is analysed. The study uses four years data of 59 companies whose subsidiary earnings are more than 20 per cent of consolidated revenue.Findings – Initial results show that annual CFS are not value relevant, whereas annual parent‐only financial statements are value relevant. However, wherever quarterly financial statements are available, CFC are found to be value relevant and parent‐only financial statements are not value relevant.Practical implications – While CFS...

The value relevance of consolidated financial statements in an emerging market

This study examines the value relevance of consolidated financial statements and cash flow statements in the Indian Stock market. In the recent years several new disclosures have been mandated in India including the cash flow statement and the preparation of consolidated financial statements. The motivation for the additional disclosures has been internationalization of accounting standards as well as better transparency. Very few countries provide information on both stand alone as well as consolidated financial statements, which makes it unique in the Indian context to study the relative importance of these statements. This study provides evidence on consolidated financial statements and the preparation of cash flow statement.Our findings are that consolidated accrual earnings and cash flows statements have no significant association with market adjusted stock return. On the contrary, the parent only earnings show significant positive relationship with the stock returns. Our results are quite contrary to the existing literature on value relevance from other counties and throws light on the way markets react to the information in an emerging market like India. These results have a policy implication for the regulators especially as we are moving towards adopting the International Financial reporting standards.

https://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID2125749_code1871889.pdf?abstractid=2125749&mirid=1

Evaluation of value relevance of consolidated earnings and cash flow reporting in India

Liquidity is an important factor for smooth trading for all assets including equities traded in the stock markets. Stock exchanges enable buyers and sellers to come together for transaction and in ...

The Impact of Derivative Trading on the Liquidity of Stocks

(ProQuest: ... denotes formulae omitted.)IntroductionAsset pricing theories generally treat liquidity risk as an unsystematic risk and hence assume that it has no impact on asset pricing when an investor creates a diversified portfolio of assets. Till recently, little attention was given to it in academics. A seminal paper by Amihud and Mendelson (1986) established the fact that liquidity of stock plays a role in asset pricing. Market for real estate demonstrates the deep impact of liquidity on asset prices. Though the prices are dependent on the supply and demand, there is no forum where buyer and seller can communicate. This information asymmetry absorbs liquidity from the market. The real estate agents earn high commissions for providing liquidity. Their commissions are high because of the lack of forum where such assets can be sold. But with the advent of Internet, the commissions have significantly gone down as it has become comparatively easier for buyer and seller to locate each other.Amihud and Mendelson (1986), in their seminal paper, studied the impact of liquidity on return on assets. They find a significant positive relationship between the returns and illiquidity where assets with lower liquidity in equilibrium yield higher returns. After establishing the role of liquidity in asset pricing, academic literature took another leap forward when Chordia et al. (2000) found the existence of market-wide liquidity and also that the liquidity of all stocks move together. Chordia et al. (2000) divided the liquidity into two parts: day-to-day liquidity that seems to be reasonably priced by the market participants, and dynamic liquidity which is the function of the market conditions. Pastor and Stambaugh (2003) studied the effect of liquidity fluctuation on the asset return. They argued that innovation in liquidity also impacts the asset return. Pastor and Stambaugh (2003) measured the impact of aggregate liquidity changes on stock returns through a new measure called liquidity beta. This part of liquidity risk is systematic and non-diversifiable in nature and thus has an impact on all securities in the market. Earlier studies on asset pricing by Conrad (1989) and Skinner (1989) found that derivative trading has no significant impact on the non-diversifiable risk of the stock.Derivatives are not independent financial instruments and hence any trading in derivatives affects the underlying security in more than one way, beneficial and destabilizing, depending on numerous factors. Various studies have researched the impact of derivatives on volatility, price, trading volume and liquidity of securities. According to Ross (1976), derivatives improve the opportunity set for the investors and hence increase the efficiency of the market. Investors with a high risk assessment sell the stock and buy the derivative, and investors with a low risk assessment buy more of the stock and sell the derivative of the stock. The net effect is to increase the aggregate demand for the stocks and thus derivative complements the stock. The stock is more valuable in the presence of its derivatives and its price increase. Conrad (1989) shows that the introduction of traded derivatives causes a permanent increase in the price of the underlying security beginning a few days before the start of trading.Derivative trading was introduced in India in June 2000. Index futures contract in the BSE Sensex and the SP Cox, 1976; Ross, 1976; Danthine, 1978; Chatrath et al. …

M S Narasimhan

Papers

The value relevance of consolidated financial statements in an emerging market

Evaluation of value relevance of consolidated earnings and cash flow reporting in India

The Impact of Derivative Trading on the Liquidity of Stocks

The Impact of Derivative Trading on the Liquidity Beta of Underlying Stocks in India

The Impact of Derivative Tradingon the Liquidity of Stocks