Value-Relevance of Accounting Information:Evidence from Iranian Emerging Stock Exchange

Authors: Ali Faal Ghayoumi, Mahmoud Dehghan Nayeri, Manouchehre Ansari, Taha Raeesi

Abstract:

This study aims to investigate empirically the valuerelevance of accounting information to domestic investors in Tehran stock exchange from 1999 to 2006. During the present research impacts of two factors, including positive vs. negative earnings and the firm size are considered as well. The authors used earnings per share and annual change of earnings per share as the income statement indices, and book value of equity per share as the balance sheet index. Return and Price models through regression analysis are deployed in order to test the research hypothesis. Results depicted that accounting information is value-relevance to domestic investors in Tehran Stock Exchange according to both studied models. However, income statement information has more value-relevance than the balance sheet information. Furthermore, positive vs. negative earnings and firm size seems to have significant impact on valuerelevance of accounting information.

Keywords: Value-Relevance of Accounting Information, Iranianstock exchange, Return Model, Price Model

Digital Object Identifier (DOI): doi.org/10.5281/zenodo.1084836

References:

[1] Alford, A., Jones, J., Leftwich, R., Zmijewski, M., "The relative informativeness of accounting disclosures in different countries", Journal of Accounting Research, 1993, Supplement 31: 183-229.
[2] Amir, E., Harris, T.S., Venuti, E.K., "A comparison of value relevance of US versus non-USGAAP accounting measures using Form 20-F reconciliations", Journal of Accounting Research, 1993, Supplement 31: 230-264.
[3] Barth, M. E., Beaver, W. H., & Landsman, W. R. "The Relevance of the Value Relevance Literature for Financial Accounting Standard Setting: Another View", Journal of Accounting and Economics, 2001, 31: 77- 104.
[4] Bauman, M.P., "A Review of Fundamental Analysis Research in Accounting", Journal of Accounting Literature, 1996, 15: PP 2-10.
[5] Beaver, W.H., Financial Reporting: An Accounting Revolution, Prentice-Hall, Englewood Cliffs, NJ, 1998.
[6] Benayed, M.R., & Abaoud, E., "Value relevance of Accounting Earnings and the Information Contents: Empirical Evidence in Tunisian Stock Exchange", 2006, WWW.SSRN.COM.
[7] Chen, J., Chen, S., & Su, X., "Is accounting information value-relevant in the emerging Chinese stock market?" , Journal of International Accounting Auditing and Taxation, 2001, 10(1): 1-22.
[8] Collins, D. W., Maydew, E. L., & Weiss, I. S., "Changes in the valuerelevance over the past forty years", Journal of Accounting and Economics, 1997, 24: 39-67.
[9] Dumontier, P., Raffournier, B., "Accounting and Capital Market: A Survey of the European Evidence", European Accounting Review, 2002, NO.11, PP: 119 - 124.
[10] Easton, P., & Harris. T., "Earnings as an Explanatory Variable for Returns", Journal of Accounting Research, 1991, 29: PP 19-36..
[11] Easton P.D., Sommers G.A., "Scale and the Scale Effect in Market- Based Accounting Research", Journal of Business Finance and accounting, 2002, NO.30, PP: 25 - 35.
[12] Elliott, J., & Hanna, J.,"Repeated accounting write-offs and the information content of earnings", Journal of Accounting Research, 1996, 34: 135-155.
[13] Feltham, G.A., Ohlson, J.A., "Valuation and clean surplus accounting for operating and financial activities." Contemporary Accounting Research, 1995, 11: 689-732.
[14] Financial Accounting Standards Board, Statement of Financial Accounting Concepts No. 2, Qualitative characteristics of accounting information. FASB, Stamford, Connecticut, 1980.
[15] Francis, J., & Schipper, K., "Have Financial Statements Lost their Relevance?", Journal of Accounting Research, 1999, 37: 319-324.
[16] Gjerde Ø., Knivsflå K., Sættem F., "The Value-Relevance of Financial Reporting in Norway 1965-2004.", 2007, WWW.SSRN.COM.
[17] Harries, T.S., Lang, M. and Möller, H.P., "The value relevance of German accounting measures: An empirical analysis." Journal of Accounting Research, 1994, 32: 187-209.
[18] Hayn, C., "The information content of losses", Journal of Accounting and Economics, 1995, 20: PP 125-153.
[19] King, R. D. and Langli, J. C., "Accounting diversity and firm valuation." The International Journal of Accounting, 1998, 33: 529-567.
[20] Lev, B. and Zarowin, P., "The boundaries of financial reporting and how to extend them.", Journal of Accounting Research, 1999, 37: 353-385.
[21] Ohlson, J., "Earnings, Book Values, and Dividends in Equity Valuation", Contemporary Accounting Research, 1995, (spring): 661- 687.
[22] Sami, H., & Zhou, H., ., "A Comparison of Value Relevance of Accounting Information in Different Segments of the Chinese Stock Market", The International of Accounting, 2004, 39: 403-427.