scholarly journals Value Relevance of Accounting Information in the Presence of Earnings Management

2020 ◽  
Vol 10 (2) ◽  
pp. 321
Author(s):  
Melinda Lydia Nelwan ◽  
Christo Simatupang ◽  
Billy Ivan Tansuria
Keyword(s):  
Time Series ◽  
Time Series Analysis ◽  
Earnings Management ◽  
Value Relevance ◽  
Accounting Information ◽  
Discretionary Accruals ◽  
Cash Flows ◽  
Book Value ◽  
Share Prices ◽  
Is Value

This study examines the value relevance of accounting information. This study investigates whether accounting information has impact on the share prices. In addition, it examines whether earnings management moderates the value relevance of accounting information to the market. Accounting information in this study consists of earnings, book value of equity, and cash flows, and the earnings management is proxied by discretionary accruals measured using the performance-adjusted modified Jones model. Using time series analysis, there are 98 samples of listed manufacturing corporations used in this study during 2014 which is the period of this study. The results show that earnings, book value of equity, and cash flows simultaneously affect the share prices, meaning that accounting information is value relevant to the market, although there is evidence that partially, only cash flows have impact on share prices. This study also found that the presence of earnings management weakens the value relevance of earnings. To some extent, the results indicate that earnings management eliminates the value relevance of earnings and cash flows.

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.

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.

scholarly journals Manajemen Laba Memoderasi Pengaruh Perubahan Laba, Perubahan Nilai Buku Ekuitas pada Relevansi Nilai Informasi Akuntansi

2019 ◽  
pp. 1419
Author(s):  
I Gede Ardian Andriawan ◽  
I Dewa Nyoman Wiratmaja
Keyword(s):  
Regression Analysis ◽  
Data Analysis ◽  
Earnings Management ◽  
Agency Theory ◽  
Value Relevance ◽  
Accounting Information ◽  
Financial Statements ◽  
Book Value ◽  
Book Values ◽  
Positive Effect

The research objective is to prove earnings management moderates the effect of earnings changes and changes in equity book values on the relevance of the value of accounting information. Data analysis using multiple regression analysis and moderated regression analysis is used to test earnings management in moderating the effect of earnings changes and changes in equity book values on the relevance of the value of accounting information. The results of the study are changes in earnings and changes in the book value of equity have a positive effect on the relevance of the value of accounting information, in addition earnings management weakens the influence of changes in earnings and changes in equity book values on the relevance of accounting information. The research implications are supporting and adding empirical evidence about agency theory, and positive contributions to users of financial statements. Keywords: Value relevance, profit, equity book value, earnings management

scholarly journals A comparison of the value relevance of interim and annual financial statements

2017 ◽  
Vol 20 (1) ◽  
Author(s):  
Mbalenhle Zulu ◽  
Marna De Klerk ◽  
Johan G.I. Oberholster
Keyword(s):  
Value Relevance ◽  
Accounting Information ◽  
Financial Statements ◽  
Sample Period ◽  
Book Value ◽  
Incremental Value ◽  
Annual Reporting ◽  
Interim Earnings ◽  
A Company ◽  
Is Value

Background: This study tests the value relevance of interim accounting information. The study also explores whether the value relevance of annual and interim financial statements has changed over time.Aim: It explores whether the value relevance of interim financial statements is higher than the value relevance of annual financial statements. Finally, it investigates whether accounting information published in interim and annual financial statements has incremental value relevance.Setting: Data for the period from 1999 to 2012 were collected from a sample of non-financial companies listed on the Johannesburg Stock Exchange.Method: The Ohlson model to investigate the value relevance of accounting information was used for the study.Results: The results show that interim book value of equity is value relevant while interim earnings are not. Interim financial statements appear to have higher value relevance than annual financial statements. The value relevance of interim and annual accounting information has remained fairly constant over the sample period. Incremental comparisons provide evidence that additional book value of equity and earnings that accrue to a company between interim and annual reporting dates are value relevant.Conclusion: The study was conducted over a long sample period (1999–2012), in an era when a technology-driven economy and more timely reporting media could have had an effect on the value relevance of published accounting information. To the best of our knowledge, this is the first study to evaluate and compare the value relevance of published interim and annual financial statements.

scholarly journals VALUE RELEVANCE LABA DAN ARUS KAS DENGAN PENDEKATAN PORTFOLIO-RETURN

2006 ◽  
Vol 6 (1) ◽  
pp. 1 ◽  
Author(s):  
Dwi Fitri Puspa
Keyword(s):  
Value Relevance ◽  
Stock Exchange ◽  
Accounting Information ◽  
Listed Companies ◽  
Cash Flows ◽  
Equity Valuation ◽  
Sample Period ◽  
Earnings Information ◽  
Portfolio Return ◽  
Is Value

<p class="Style1"><em>The value relevance literature is related to the usefulness of financial </em><em>statement asan information in equity valuation. This study is conducted </em><em>to measure the value relevance of earnings and cash flows by using the </em><em>portfolio return approach. the study is to examine whether the proportion </em><em>of all information in security returns that are captured by the accounting-</em><em>based measures in earnings information are higher than in cash flows </em><em>information. The sample covers listed companies in Jakarta Stock Exchange in 1991. The number of samples that fulfills the criteria are 79 companies and the sample period was 1996 to 2001. The findings indicate that the value relevance of accounting information in terms of earnings and cash flows is value-relevant. Furthermore the findings show that the value relevance of earnings information is higher than that of cash flows information. The knowledge of the change in earnings (cash flows) earns 45.68% (16.89%) of these returns.</em></p><p class="Style1"><strong><em>Keywords: </em></strong><em>value relevance; portfolio return; earnings; cash flows</em></p>

scholarly journals Investigation on the value relevance of accounting information: evidence from incorporated companies in the Singapore capital market

2016 ◽  
Vol 13 (3) ◽  
pp. 9-21 ◽  
Author(s):  
Basil Abeifaa Der ◽  
Petr Polak ◽  
Masairol Masri
Keyword(s):  
Earnings Management ◽  
Cash Flow ◽  
Capital Market ◽  
Value Relevance ◽  
Accounting Information ◽  
Book Value ◽  
Valuation Model ◽  
Long Run ◽  
Short Run ◽  
Asset Turnover

The purpose of this study is to investigate the relative, incremental and the systematic changes in value relevance of the accounting information. This study also attempts to investigate the effect of earnings management on the value relevance of accounting information. It basically uses Ohlson’s (1995) valuation model to test the conceptual framework. The findings of this paper reveal that book value is more value relevant and incremental followed by earnings and, then, cash flow. Cash flow, however, performs a lesser valuation role. The results also show that combined book value and earnings are more value relevant than combined book value and cash flow. As a third contribution, the paper also finds that the value relevance of some accounting variables has increased over time, while others showed no evidence of their inclined or declined patterns in the value relevance of accounting information. Finally, the paper finds that earnings management has no effect on the value relevance of accounting information. Further analyses suggest that earnings management is opportunistic in the short run, but efficient in the long run, when firms are small or have high asset turnover

Corporate governance, earnings management and the value-relevance of accounting information: Evidence from Pakistan

2018 ◽  
Vol 05 (03) ◽  
pp. 1850025
Author(s):  
Waqas Bin Khidmat ◽  
Man Wang ◽  
Sadia Awan
Keyword(s):  
Corporate Governance ◽  
Earnings Management ◽  
Positive Impact ◽  
Value Relevance ◽  
Stock Exchange ◽  
Accounting Information ◽  
Annual Reports ◽  
Book Value ◽  
Governance Practices ◽  
Using Data

This paper examines the effect of corporate governance and earnings management on the value relevance of accounting information. Using data collected from the annual reports of non-financial companies listed in Pakistan Stock Exchange, it is concluded that earnings and book value are value relevant. The value relevance of earnings decreases while the value relevance of book value increases for the firms engaged in the earnings management. On the contrary, good corporate governance practices have a positive impact on the value relevance of earnings as well as the book value. Firm-specific characteristics enhance the predictive power of the model by more than 14%. A robustness test was carried out for alternative measures of earnings management. For this purpose, first performance-matched discretionary accruals were calculated following Kothari et al. (2005). Second, short-term accruals (DeChow, 1994), long-term accruals (Teoh et al., 1998b) and total accruals (Whelan, 2004), are calculated to analyze the effect on the value relevance of earnings and book value. The results support our null hypothesis.

The Impact of IFRS Adoption on Earnings Management Activities and Value Relevance of Accounting Information: Applied Study

2018 ◽  
Vol 1 (3) ◽  
pp. 11-42
Author(s):  
Mohamed Ibrahim Mohamed Hessian
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Value Relevance ◽  
Accounting Information ◽  
Discretionary Accruals ◽  
Economic Benefits ◽  
Financial Reporting Standards ◽  
Study Results ◽  
The Impact

This study focused on the economic benefits of adoption of IFRS. More specifically, this study emphasis on whether the quality of the accounting information has been improved after the adoption of IFRS. The study investigated quality of accounting information through two main variables: earnings management and the value relevance of accounting information. The study was applied on 56 Egyptian listed companies during the period from 1997 to 2011, which divided into two periods: the period after the adoption of the standards from 2007 to 2011, and before the adoption of the International Financial Reporting Standards from 1997 to 2006. The research concluded that there is a significant impact of the adoption of IFRS on managerial opportunities to manage earnings using discretionary accruals, which is reflected in the lower value relevance of accounting information. Study results also indicate that companies with high leverage are the lowest companies in the value relevance of accounting information, and that companies that are subject to private sector law No. 159 of 1981 are the most companies engaged in earnings management activities through discretionary accruals, large size companies, without any significant impact on future growth opportunities and listing on global exchanges.

scholarly journals VALUE RELEVANCE OF ACCOUNTING FIGURES IN PRESENCE OF EARNINGS MANAGEMENT. ARE ENFORCEMENT AND OWNERSHIP DIFFUSION REALLY ENOUGH?

2016 ◽  
Vol 17 (6) ◽  
pp. 1286-1299 ◽  
Author(s):  
Susana CALLAO ◽  
Riccardo CIMINI ◽  
José Ignacio JARNE
Keyword(s):  
Corporate Governance ◽  
Earnings Management ◽  
Value Relevance ◽  
Value Added ◽  
Discretionary Accruals ◽  
Book Value ◽  
Moderating Factors ◽  
Accounting Numbers ◽  
Enforcement Mechanisms

The study assesses and compares the value relevance (VR) of accounting numbers in entities that experienced high discretionary accruals intensity and so possible earnings management (EM) behaviours, testing whether and in what extent the quality of enforcement and governance mechanisms act as moderating factors on the relation EM-VR. Based on a sample of 2 667 European non-financial entities, the results show that while the VR of earnings is low in entities that experienced high discretionary accruals intensity, book value increases its VR. The study also shows that the quality of enforcement mechanisms and the ownership diffusion (that proxies the quality of corporate governance) are effectively able to obstruct the loss of VR of earnings. The value added of the paper consists in showing that both the quality of enforcement and the ownership diffusion contrast only in part and in different manner the loss of VR of earnings, due to the presence of EM behaviours, acting only in part as moderating factors.

The accounting value relevance of earnings and book value: Tunisian banks and financial institutions

2018 ◽  
Vol 60 (2) ◽  
pp. 342-354 ◽  
Author(s):  
Ali Ahmadi ◽  
Abdelfettah Bouri
Keyword(s):  
Financial Institutions ◽  
Firm Value ◽  
Stock Price ◽  
Value Relevance ◽  
Stock Exchange ◽  
Accounting Information ◽  
Content Type ◽  
Book Value ◽  
Share Prices ◽  
Corporate Websites

Purpose As an increasing number of business organizations around the world are engaged in the value relevance of accounting information, this study aims to assess the field of the accounting value relevance of book value and earnings in share prices of banks and financial institutions listed in the Tunisian stock exchange. Design/methodology/approach Using a sample of available banks and financial institutions listed in the Tunisian Stock Exchange from 2010 to 2015, this paper accommodates the documented accounting information in an emergent market context by using stock price of three months after year-end as a dependent variable. This study uses the panel regression technique on 24 banks and financial institutions during the study period. Findings The authors find that earnings and book value are statistically significantly associated with firm value. Also, using these variables together is positively related to the firm stock price share. Comparatively, these obtain evidence that book value is statistically more value-relevant than earning per share models; expectedly, the earnings explain a higher proportion of the stock price for the group of financial institutions than the group of banks. Originality/value A Web-based search is performed during the second quarter of 2016, locating the corporate websites of the sample firms, and the official site of the Datastream (worldscope) is identified. The sample period is 2010-2015 (144 firm-year observations).

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