The value relevance of environmental performance: evidence from Indonesia

2017 ◽  
Vol 13 (4) ◽  
pp. 817-827 ◽  
Author(s):  
Susi Sarumpaet ◽  
Melinda Lydia Nelwan ◽  
Dian Nirmala Dewi
Keyword(s):  
Environmental Performance ◽  
Value Relevance ◽  
Share Price ◽  
Annual Reports ◽  
Content Type ◽  
Share Prices ◽  
Listed Firms ◽  
Market Values ◽  
The Press ◽  
The Relationship

Purpose This paper aims to extend previous developed market-based research on the value relevance of environmental performance by testing the relationship between share prices of Indonesian-listed corporations and their environmental performance ratings. Design/methodology/approach The sample consists of 60 listed firms which are rated by the Indonesia Ministry of Environment between 2002 and 2012, resulting in a sample of 246 observations. The Ohlson (1995) model was utilized and modified by including environmental ratings. Findings The research finds that superior environmental performance is associated with higher share price, whereas inferior environmental performance is value irrelevant to the market. Research limitations/implications Considering the significance of PROPER, this research did not observe other types of corporate environmental performance, such as those released by the press and reported in the company annual reports and websites. These limitations are not controlled for in the tests, and this might confound inferences. Originality/value The paper addresses a gap in the literature by providing insight on how a developing capital market values both superior and inferior environmental performance. It also provides implication on the effectiveness of environmental monitoring policy in providing incentives for firms to improve their environmental performance

Intellectual capital vs the book-value of assets

2014 ◽  
Vol 15 (1) ◽  
pp. 65-82 ◽  
Author(s):  
Sang Ho Kim ◽  
Dennis Taylor
Keyword(s):  
Human Capital ◽  
Intellectual Capital ◽  
Value Relevance ◽  
Share Price ◽  
Annual Reports ◽  
Content Type ◽  
Book Value ◽  
Listed Firms ◽  
Structural Capital ◽  
Tangible Assets

Purpose – The purpose of this paper is to provide new evidence, made possible by human capital data that became available after IFRS adoption, on the productivity of intellectual capital and its components. These productivity measures are modelled to determine their value-relevance in the share market, and the modelling is extended to comparative productivity measures for the book-value of assets. Design/methodology/approach – Financial data are sourced from financial databases and company annual reports on a sample of 160 Australian listed firms over a five-year period. Panel regression analysis is used to test five models built from Riahi-Belkaoui's (1999) general price model of the value-relevance of accounting numbers. Findings – The results show that the productivity of human capital, structural capital and intellectual capital are each significantly positively related to share price (i.e. have value-relevance), whereas the productivity of total assets at book-value is non-significant and tangible assets is inversely significant. Originality/value – This study constructs a new improved method of computing the amount of structural capital, and uses recently available financial statement data to provide first-time evidence on human capital and its inclusion in the determination of the amount of intellectual capital. These new models and data enable a direct comparison to be made between the value-relevance of intellectual and the book-value of assets.

Enhanced business reporting: value relevance and determinants of valuation-related disclosures

2017 ◽  
Vol 18 (4) ◽  
pp. 832-867 ◽  
Author(s):  
Christine Reitmaier ◽  
Wolfgang Schultze
Keyword(s):  
Decision Making ◽  
Content Analysis ◽  
Value Relevance ◽  
Annual Reports ◽  
Valuation Theory ◽  
Voluntary Disclosures ◽  
Content Type ◽  
Book Value ◽  
Business Reporting ◽  
Market Values

Purpose Enhanced business reporting (EBR) seeks to address the information needs of investors when making company valuations for investment decisions. The purpose of this paper is to analyze the relevance for market valuation of EBR disclosures that are directly related to firm valuation (value-based reporting (VBR)). Design/methodology/approach Data are hand collected from annual reports of German publicly listed companies over five years. The content analysis is based on the valuation-related disclosure framework of the German Schmalenbach Society of Business Administration. A 2SLS approach accounts for potential endogeneity. Findings Share-based compensation, leverage, corporate size, and share volatility are significant determinants of VBR. The level of VBR is significantly associated with market values and provides additional market value explanatory power, indicating its relevance to investors in the process of valuation and decision making. Also, the relevance of book value and earnings for explaining market values increases for firms with better VBR. The findings are robust to the exclusion of banks and assurance companies and to alternative model and variable specifications. Research limitations/implications The research contributes to the literature on voluntary disclosures by testing an EBR framework explicitly derived from valuation theory. The results provide indirect evidence of the investors’ use of respective valuation techniques in decision making. A contribution is made to the value relevance literature by showing that valuation-related disclosures constitute a suitable proxy for “other information” in the Ohlson’s (1995) model. Such disclosures complement traditional accounting metrics, i.e. book value and earnings, as basis for valuations. Potential caveats relate to the content analysis of annual reports and the endogeneity of voluntary disclosures. Originality/value This paper informs the debate on further developments of EBR in helping to identify important components thereof.

Does institutional ownership affect the value relevance of accounting information?

2020 ◽  
Vol 28 (2) ◽  
pp. 323-342
Author(s):  
Mohamed Omran ◽  
Yasean A. Tahat
Keyword(s):  
Value Relevance ◽  
Accounting Information ◽  
Market Value ◽  
Institutional Ownership ◽  
Financial Leverage ◽  
Content Type ◽  
Book Value ◽  
Share Prices ◽  
Listed Firms ◽  
Positive Effects

Purpose Drawing upon agency theory, this study aims to assess the value relevance (VR) of accounting information released by non-financial firms listed on the Kuwait stock exchange for the period of 2015-2018. Also, the influence of institutional ownership level and other explanatory variables, namely, book value per share, earnings per share, growth in assets and changes in financial leverage on share prices is examined. Design/methodology/approach To test the hypotheses, the Ohlson (1995) model is extended. This study uses panel data analysis and applies appropriate statistical techniques to measure empirical relationships. Findings The results show that the VR of accounting information released by the Kuwaiti non-financial listed firms varies over the period of 2015-2018. Book value and earnings have significant and positive effects on share prices. In recent years, the VR of book value information has been growing, while that of earnings information has been declining. Institutional ownership level has a significant and positive influence on the VR of accounting information released by the Kuwaiti non-financial listed firms. The findings confirm a positive power, signalling growth in assets regarding the share prices. However, no significant relationship between changes in financial leverage and share prices is found. Practical implications The findings of the study provide evidence of the linkage between VR and institutional ownership level, which promotes the understanding of the influence of institutional investors on a firm’s market value. Empirical evidence from Kuwait will have international implications and can serve as a guide for accounting researchers studying other emerging markets. Capital market regulators can provide guidelines in the form of information characteristics and elements of financial statements that need improvement. Finally, the findings assist non-financial listed firms to enhance the quality of accounting information by identifying the strengths and weaknesses in their financial reports. Originality/value This study extends the previous literature by investigating a relatively new set of data in more depth than that has been examined by prior research, which focusses on the relationship between accounting information and the firm’s market value.

How does capital market respond to Certified Emission Reductions (CERs) announcements in India

2019 ◽  
Vol 45 (7) ◽  
pp. 950-965 ◽  
Author(s):  
Praveen Kumar ◽  
Mohammad Firoz
Keyword(s):  
Event Study ◽  
Stock Prices ◽  
Abnormal Returns ◽  
Share Price ◽  
Emission Reductions ◽  
Content Type ◽  
Share Prices ◽  
The Mean ◽  
The Impact ◽  
The Relationship

Purpose The purpose of this paper is to analyze the relationship between Certified Emission Reductions (CERs) information and a firm’s stock prices. Design/methodology/approach The present study is based on 193 CERs announcements by Indian firms over a 13-year period 2005–2017. The event study methodology is used to examine the impact of CERs announcements on a firm’s share prices. Findings The study suggests that the issuance of CERs did not produce any significant abnormal return. More specifically, the outcomes of event study shows that over a two-day event window from the event day to the day after the event (i.e. days 0 to 1), the mean and median of AARs are −0.25 and −0.34 percent, respectively. The abnormal returns on day 1 are not statistically significant as per the t-test. Moreover, the mean and median of abnormal returns after one day (−1) are negative, indicating that investors react negatively to CERs announcements. However, the mean and median of CAARs over both the two-day (i.e. days −1 to 0 and days 0 to +1) and three-day (i.e. days −1 to +1) event windows are positive, but not statistically significant based on the t-test. Research limitations/implications The findings of the study are quite comprehensive, relatively used only market-based criteria of a firm’s financial performance, e.g., share price, at times, inhibits generalizing the results. Originality/value To the best of the author’s knowledge, the present study is a first of its kind to investigate the relationship between the CERs information and a firm’s stock prices.

scholarly journals The extent of segmental reporting and its value relevance: cross-country evidence

2018 ◽  
Vol 8 (2) ◽  
pp. 279-299 ◽  
Author(s):  
Ghassan H. Mardini ◽  
Yasean A. Tahat ◽  
David M. Power
Keyword(s):  
Financial Reporting ◽  
Value Relevance ◽  
Annual Reports ◽  
Reporting Standard ◽  
International Financial Reporting Standard ◽  
Equity Prices ◽  
Policy Makers ◽  
Content Type ◽  
Share Prices ◽  
Ifrs 8

Purpose The purpose of this paper is to examine the extent of segmental reporting disclosure and its value relevance to a sample of Qatari and Jordanian listed companies following the implementation review of the International Financial Reporting Standard (IFRS) 8. This was the first standard to be subjected to a post-implementation review. Annual reports are initially analyzed to investigate the level of segmental information that was published by companies in these two countries. Design/methodology/approach Using the Ohlson (1995) model, the study employs regression analysis to test the hypotheses relating to the value relevance of the segmental disclosures uncovered. In addition, one-way ANOVA and Kruskal-Wallis tests are used to investigate any variation in segmental reporting among sectors. Findings The findings indicate that the amount of segmental information disclosed by the sample firms differs across sectors. Moreover, the segmental information provided (including the number of segments and the amounts of disclosure) is value relevant and can explain the variations in firms’ share prices. Practical implications The results of the current investigation have implications for policy makers, including the International Accounting Standards Board, as well as for accounting regulators in Jordan and Qatar. They suggest that the segmental disclosures supplied under IFRS 8 are value relevant for equity prices in a developing country context. Compliance with IFRS 8 should thus be monitored to ensure that all firms provide the segmental disclosures that they are meant to supply under the terms of the standard. Originality/value This paper is one of the few to provide empirical evidence on the role of segmental reporting following the post-implementation review that was conducted for IFRS 8.

Share price informativeness and dividend smoothing behavior in GCC markets

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Razaz Felimban ◽  
Sina Badreddine ◽  
Christos Floros
Keyword(s):  
Private Information ◽  
Developed Countries ◽  
Share Price ◽  
Price Informativeness ◽  
Content Type ◽  
Share Prices ◽  
Listed Firms ◽  
Gcc Countries ◽  
Study Results ◽  
Dividend Smoothing

PurposeThis paper examines the dividend smoothing (DS) behaviour in the Gulf Cooperation Council (GCC) countries in emerging markets where the response to news and the economic environment are different from those of developed countries.Design/methodology/approachThe authors examine the effect of share price informativeness on DS in the GCC markets using unbalanced panel data for a sample of 628 GCC-listed firms during 1994–2016. For the regression analysis, the hypotheses are tested using panel regressions and generalised method of moments (GMM) estimation.FindingsFirst, the Lintner model shows that the DS degree in GCC firms is comparable to that of a developed market. Second, and importantly, the results reveal that the DS in GCC firms is sensitive to private information of share prices. Finally, the findings indicate that information asymmetry (IA) and agency-based models affect the tendency to smooth dividends in the GCC markets.Originality/valueThis study is the first study to measure the degree of DS using data for all GCC countries. The authors also identify other determinants of DS behaviour and test the agency and IA explanations for DS in GCC-listed firms. The findings are highly recommended to financial managers and analysts dealing with the GCC markets. This study helps financial analysts to use the share price informativeness as an indicator for the presence of the IA. The study results are beneficial to researchers in understanding the relationship between DS and share price informativeness.

scholarly journals The relationships between reporting format, environmental disclosure and environmental performance

2017 ◽  
Vol 18 (4) ◽  
pp. 425-444 ◽  
Author(s):  
Abeer Hassan ◽  
Xin Guo
Keyword(s):  
Environmental Performance ◽  
Strategic Communication ◽  
Environmental Information ◽  
Annual Reports ◽  
Equation Modeling ◽  
Legitimacy Theory ◽  
Environmental Disclosure ◽  
Content Type ◽  
New Perspective ◽  
The Relationship

Purpose The purpose of this paper is to assess whether European companies issue standalone environmental reports in an attempt to gain and maintain legitimacy with relevant stakeholders. This is achieved by creating and empirically testing a model of the relationships between corporate reporting format, industry membership, environmental disclosure, and environmental performance. Design/methodology/approach Data are collected from 100 large European companies in carbon and non-carbon-intensive industries. Hypothesis testing is conducted via structure equation modeling. Findings Evidence exists that companies which disclose environmental information in standalone environmental reports tend to provide higher levels of environmental information than companies which combine financial and environmental disclosure in annual reports. The findings support greenwashing as a new perspective of legitimacy theory: companies in carbon-intensive industry use standalone environmental reports to pose as good corporate citizens even when they are not. Research limitations/implications The sample companies are large European companies and this could limit the generalizability of research findings. The authors call for longitudinal studies examining how the relationship between reporting format and environmental disclosure changes. Practical implications This paper suggests that reporting format be considered a proactive, strategic communication-driven activity rather than a decision that managers passively make in response to external scrutiny. Originality/value The paper contributes to the literature by adding to the scarce evidence of the relationship between reporting format and environmental disclosure. Greenwashing as a new perspective of legitimacy theory is used to develop research hypotheses.

scholarly journals Value Relevance of Accounting Information in the Botswana Listed Companies

2020 ◽  
Vol 13 (5) ◽  
pp. 46
Author(s):  
Christian J. Mbekomize ◽  
Selinkie Popo
Keyword(s):  
Market Share ◽  
Value Relevance ◽  
Stock Exchange ◽  
Accounting Information ◽  
Cash Flows ◽  
Least Square ◽  
Share Price ◽  
Annual Reports ◽  
Book Value ◽  
Share Prices

The main purpose of the study was to examine the statistical relationship between four sets of accounting information and market share prices using the data of companies listed on the Botswana Stock Exchange over the period from 2012 to 2018. Annual reports and Botswana Stock Exchange – Equity Statistics data bank were the sources of accounting information and market prices respectively. The Ordinary Least Square regression method was used to analyse data. The results suggest that earnings are the most value relevant information to share prices followed by dividends and lastly book value. While book value yielded weak value relevance operating cash flows did not explain changes in share prices in the Botswana equity market. The combination of earnings and dividends was more value relevant than any other mix of accounting amounts. The study further revealed that the market share price at the end of the 6th month from the year end was the most influenced price. These results have implications to quoted companies regarding the importance they attach on earnings and dividends information and their timely publication. The paper recommends for speedy dissemination of earnings and dividends information since investors significantly consider such information in market share pricing decisions.

The value relevance and reliability of intangible assets

2014 ◽  
Vol 22 (3) ◽  
pp. 182-216 ◽  
Author(s):  
Xu-Dong Ji ◽  
Wei Lu
Keyword(s):  
Financial Reporting ◽  
Intangible Assets ◽  
Value Relevance ◽  
Relevant Information ◽  
Accounting Standard ◽  
Content Type ◽  
Listed Firms ◽  
Financial Reporting Standards ◽  
The Relationship ◽  
Relevance And Reliability

Purpose – The purpose of this paper is to examine the value relevance of intangible assets, including goodwill and other types of intangibles in the pre- and post-adoption periods of International Financial Reporting Standards (IFRS). Most importantly, this paper investigates whether the value relevance of reported intangible assets is associated with their value reliability. Furthermore, this paper reports whether the adoption of IFRS improves the value relevance of intangible assets and alters the relationship between value relevance and reliability. Design/methodology/approach – Both price and return models based on Ohlosn theory (1995) are employed to test the value relevance and value reliability of intangibles. Australian-listed firms with capitalised intangibles from 2001 to 2009 are selected in this study. The sample includes 6,650 firm-year observations. Findings – The main result shows that capitalised intangible assets are value relevant in Australia, in both the pre- and post-adoption of IFRS periods. Value relevance is higher in firms with more reliable information on intangible assets. This study finds that the value relevance of intangibles has declined in the post-adoption period of IFRS. However, the positive relationship between the value relevance and the reliability of intangibles has remained unchanged in the post-adoption period. Originality/value – The paper contributes a new measurement of value reliability of accounting information about intangibles. This paper is one of few studies on the relationship between value relevance and reliability of intangible assets. The results show that value relevance is positively associated with value reliability. This suggests that, when accounting standard setters assess whether the existing IFRS of intangibles should be improved in the future, they need to think not only in terms of whether the standard can provide more relevant information of intangibles to investors but also whether the standard can make the information of intangibles more reliable.

Intellectual capital disclosure and corporate market value: does board diversity matter?

2017 ◽  
Vol 7 (3) ◽  
pp. 369-398 ◽  
Author(s):  
Mutalib Anifowose ◽  
Hafiz Majdi Abdul Rashid ◽  
Hairul Azlan Annuar
Keyword(s):  
Value Relevance ◽  
Stock Exchange ◽  
Generalized Method Of Moments ◽  
Ethnic Composition ◽  
Board Diversity ◽  
Content Type ◽  
Listed Firms ◽  
The Relationship ◽  
Moderating Role

Purpose The purpose of this paper is to examine the relationship between IC disclosure and the corporate market value (CMV) of listed firms on the main board of Nigeria Stock Exchange and to test the moderating effect of religious and ethnic composition of board members on the relationship. Design/methodology/approach This study applies the signaling and upper echelons theories in formulating four hypotheses that guide the results analysis. By employing a two-step dynamic system generalized method of moments and controlling for the possible endogeneity effect on the parameters estimated for a sample of 91 listed firms on main board of Nigeria Stock Exchange, this study investigates the association of IC disclosure with CMV, namely, cost of capital and market capitalization, and the moderating role of religious and ethnic composition on such association using data over the 2010 to 2014 financial years. Findings The results show a significant positive relationship between overall IC disclosure and market capitalization and a negative impact on cost of capital, which are in line with the hypothesized propositions. The moderating effect of board diversity is also confirmed. This study contributes to recent evidence concerning the value relevance of IC information to investors and other interested stakeholders and the established moderating role of board diversity in IC disclosure-related studies. Practical implications The regulators may consider development of standards on board composition about religious and ethnic composition in order to curb the domination from same group in the board room. Those charged with governance should be concerned with the disclosure of IC information in the financial statements as it has value relevance to the investors, in line with signaling theory. Social implications The ethnic and religious composition of board members is a significant factor within the board room and needs to be given adequate consideration. Originality/value This study is the first to consider IC disclosure across whole sectors in the Nigerian economy and looks upon ethnicity and religious affiliation of boards as moderating variables. The study controls for heteroscedasticity and endogeneity issues by adopting two-step dynamic system generalized method of moments.

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