The Value Relevance of Accounting Information in Financial Industry : 15-Year Perspective
Keywords:
Accounting Information, Value Relevance, Financial IndustryAbstract
The purpose of this study is to examine the relevance of book value and earnings per
share on stock price of the financial industry in the Stock Exchange of Thailand. In addition, the
incremental value relevance of book value and earnings per share is tested. The secondary data
is collected SETSMART online database over the 15-year period from 2004 – 2018 of 762 examples.
The relevance and comparison of the increment of book value and earnings per share is analyzed
by regression analysis techniques based on valuation model of Ohlson (1995).
The results find that book value and earnings per share are statistically significantly
associated with stock price. From the incremental relevance analysis, the results show that book
value and earnings per share of the financial industry have been associated with stock prices over
fifteen years, indicating the usefulness of accounting information for decisions. In addition,
the research findings show that earnings have more incremental value relevance than book value
from 2009 to 2018 continuously.
References
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Adaramola, A. O., & Oyerinde, A. A. (2014). Value Relevance of Financial Accounting Information of Quoted Companies in Nigeria: A Trend Analysis. Research Journal of Finance and Accounting, 5(8), 86-93.
Ahmadi, A., & Bouri, A. (2018). The Accounting Value Relevance of Earnings and Book Value: Tunisian Banks and Financial Institutions. International Journal of Law and Management, 60(2), 342-354.
Akarim, Y. D., Celik, S., & Zeytinoglu, E. (2012). The Causality Relationship between Accounting Earnings and Stock Returns in The Light of Value Relevance Theory. Journal of Money, Investment and Banking, 25, 194-198.
Ayzer, B. F., & Cema, I. (2013). Effects of New Financial Report Standards on Value Relevance. A Study of Turkish Stock Markets. International Journal of Economics and Finance, 5(10), 10-13.
Ball, R., & Brown, P. (1968). An Empirical Evaluation of Accounting Income Numbers. Journal of Accounting Research, 6, 159-178.
Barth, M. E. (2000). Valuation-based Accounting Research: Implications for Financial Reporting and Opportunities for Future Research. Accounting and Finance, 40(1), 7-31.
Barth, M. E., Beaver, W. H., & Landsman, W. R. (1998). Relative Valuation Roles of Equity Book Value and Net Income as a Function of Financial Health. Journal of Accounting and Economic, 25(1), 1–34.
Beaver, W. H. (2002). Perspectives on recent capital market research. The Accounting Review, 77(2), 453-474.
Bepari, M. K. (2015). Relative and Incremental Value Relevance of Book Value and Earnings during: The Global Financial Crisis. International Journal of Commerce and Management, 25(4), 531-556.
Brimble, M., & Hodgson, A. (2007). On the intertemporal value relevance of conventional financial accounting in Australia. Accounting and Finance, 47(4), 599–622.
Bushman, R. M. (2014). Thoughts on Financial Accounting and the Banking Industry. Journal of Accounting and Economics, 58(2), 384-395.
Chandrapala, P. (2013). The Value Relevance of Earnings and Book Value: The Importance of Ownership Concentration and Firm Size. Journal of Competitiveness, 5(2), 98-107. DOI: 10.7441/joc.2013.02.07
Chen, C. J. P., Chen, S., & Su, X. (2001). Is accounting information value-relevance in emerging Chinese stock market? Journal of International Accounting, Auditing & Taxation, 10(1), 1-22.
Choi, H. S., & Jang, J. I. (2006). The Relative Value-relevance of Earnings and Cash Flow Measures in Each Life-Cycle Stage. Korean Management Review, 35(5), 1339-1360.
Collins, D. W., Maydew, E. L., & Weiss, I.S. (1997). Changes in the Value-relevance of Earnings and Book Values over The Past Forty Years. Journal of Accounting and Economics, 24(1), 39-67.
Fama, E. (1970). Efficient Capital Markets : A Review of Theory and Empirical Work. Journal of Finance, 25(2), 383-417.
Francis, J., & Schier, K. (1999). Have Financial Statements Lost Their Relevance? Journal of Accounting Research, 37(2), 319-353.
Glezakos, M., Mylonakis, J., & Kafuoros, C. (2012). The Impact of Accounting Information on Stock Prices: Evidence from Athens Stock Exchange. International Journal of Economics and Finance, 4(2), 56-68.
Gregory, A. (1992). Valuing Companies. Analyzing Business Worth. Great Britain : Woodhead-Faulkner.
Gupta, R., & Jayadev, M. (2016).Business strategy and systemic risk - evidence from Indian Banks Indian, IIMB-Working Paper No: 503, Institute of Management Bangalore.
Hadi, M. M. (2004). The importance of accounting information to the investors in banking sector in Kuwait. Working paper, University of Kuwait.
Hayn, C. (1995). The Information Contents of Losses. Journal of Accounting and Economics, 20(2), 125-153.
Jang, J. I., Jung, H. J., & Lee, K. J. (2002). The Value Relevance of Accounting Earnings and Book Value. Daehan. Journal of Business, 513-53, printed in Korean.
Keener, M. H. (2012). The Relative Value Relevance of Earnings and Book Values across Industries. Journal of Finance and Accounting, 3(2), 9-19.
Lev, B. (1989). On The Usefulness of Earnings and Earnings Research: Lessons and Directions from Two Decades of Empirical Research. Journal of Accounting Research, 27(3), 153-92.
Manganaris, P., Spathis, C., & Dasilas, A. (2016). How institutional factors and IFRS affect the value relevance of conservative and non-conservative banks. Journal of Applied Accounting Research, 17(2), 211-236.
Mostafa, W. (2017). The impact of earnings management on the value relevance of earnings Empirical evidence from Egypt. Managerial Auditing Journal, 32(1), 50-74. DOI 10.1108/MAJ-01-2016-1304
Ohlson, J. A. (1995). Earnings, Book Values and Dividends in Equity Valuation. Contemporary Accounting Research, 11(2), 661-687.
Paglietti, P. (2009). Earnings Management, Timely Loss Recognition and Value Relevance in Europe Following The IFRS Mandatory Adoption: Evidence from Italian Listed Companies. Business and Management Sciences International Quarterly Review, 4(1), 97-117.
Pervan, I., & Bartulovic, M. (2014). Value Relevance of Accounting Information: Evidence from South Eastern European Countries. Economic Research-Ekonomska Istraživanja, 27(1), 181-190.
SET. (2015). Industry-Group-Sector-Classification. Retrieved from https://www.set.or.th/th/products/index/files/2015-2-12_SET-Industry-Group-Sector-Classification-Final-version_V1.pdf
_____. (2015). Manual Guides : Key Statistics, Financial Ratios and Glossary. Retrieved from https://www.set.or.th/th/market/files/SET_Formula_Glossary_Jun2015.pdf
TFAC. (2015). Conceptual Framework for Financial Reporting (2015). Retrieved from http://www.tfac.or.th/upload/9414/NOxoIsj0qL.pdf
Tsalavoutas, I., Andre, P., & Evans, L. (2012). The Transition to IFRS and the Value Relevance of Financial Statements in Greece. British Accounting Review, 44(4), 262-277.
Vichitsarawong, T (2011). The Value Relevance of Earnings and Cash Flows: Evidence from Thailand. Journal of Accounting Profession, 7(19), 39-53.
Vijitha, P., & Nimalathasan, B. (2014). Value Relevance of Accounting Information and Share Price: A Study of Listed Manufacturing Companies in Sri Lanka. Merit Research Journal of Business and Management, 2(1), 1-6.
Wadhanapatee,S., Bialowas, P., & Phuangsup, W. (2012). Tests of Market Efficiency in the Stock Exchange of Thailand in the Perspective of US Monetary Policy Announcements. Suddhiparitad Journal, 26(79), 109 –130.
Adaramola, A. O., & Oyerinde, A. A. (2014). Value Relevance of Financial Accounting Information of Quoted Companies in Nigeria: A Trend Analysis. Research Journal of Finance and Accounting, 5(8), 86-93.
Ahmadi, A., & Bouri, A. (2018). The Accounting Value Relevance of Earnings and Book Value: Tunisian Banks and Financial Institutions. International Journal of Law and Management, 60(2), 342-354.
Akarim, Y. D., Celik, S., & Zeytinoglu, E. (2012). The Causality Relationship between Accounting Earnings and Stock Returns in The Light of Value Relevance Theory. Journal of Money, Investment and Banking, 25, 194-198.
Ayzer, B. F., & Cema, I. (2013). Effects of New Financial Report Standards on Value Relevance. A Study of Turkish Stock Markets. International Journal of Economics and Finance, 5(10), 10-13.
Ball, R., & Brown, P. (1968). An Empirical Evaluation of Accounting Income Numbers. Journal of Accounting Research, 6, 159-178.
Barth, M. E. (2000). Valuation-based Accounting Research: Implications for Financial Reporting and Opportunities for Future Research. Accounting and Finance, 40(1), 7-31.
Barth, M. E., Beaver, W. H., & Landsman, W. R. (1998). Relative Valuation Roles of Equity Book Value and Net Income as a Function of Financial Health. Journal of Accounting and Economic, 25(1), 1–34.
Beaver, W. H. (2002). Perspectives on recent capital market research. The Accounting Review, 77(2), 453-474.
Bepari, M. K. (2015). Relative and Incremental Value Relevance of Book Value and Earnings during: The Global Financial Crisis. International Journal of Commerce and Management, 25(4), 531-556.
Brimble, M., & Hodgson, A. (2007). On the intertemporal value relevance of conventional financial accounting in Australia. Accounting and Finance, 47(4), 599–622.
Bushman, R. M. (2014). Thoughts on Financial Accounting and the Banking Industry. Journal of Accounting and Economics, 58(2), 384-395.
Chandrapala, P. (2013). The Value Relevance of Earnings and Book Value: The Importance of Ownership Concentration and Firm Size. Journal of Competitiveness, 5(2), 98-107. DOI: 10.7441/joc.2013.02.07
Chen, C. J. P., Chen, S., & Su, X. (2001). Is accounting information value-relevance in emerging Chinese stock market? Journal of International Accounting, Auditing & Taxation, 10(1), 1-22.
Choi, H. S., & Jang, J. I. (2006). The Relative Value-relevance of Earnings and Cash Flow Measures in Each Life-Cycle Stage. Korean Management Review, 35(5), 1339-1360.
Collins, D. W., Maydew, E. L., & Weiss, I.S. (1997). Changes in the Value-relevance of Earnings and Book Values over The Past Forty Years. Journal of Accounting and Economics, 24(1), 39-67.
Fama, E. (1970). Efficient Capital Markets : A Review of Theory and Empirical Work. Journal of Finance, 25(2), 383-417.
Francis, J., & Schier, K. (1999). Have Financial Statements Lost Their Relevance? Journal of Accounting Research, 37(2), 319-353.
Glezakos, M., Mylonakis, J., & Kafuoros, C. (2012). The Impact of Accounting Information on Stock Prices: Evidence from Athens Stock Exchange. International Journal of Economics and Finance, 4(2), 56-68.
Gregory, A. (1992). Valuing Companies. Analyzing Business Worth. Great Britain : Woodhead-Faulkner.
Gupta, R., & Jayadev, M. (2016).Business strategy and systemic risk - evidence from Indian Banks Indian, IIMB-Working Paper No: 503, Institute of Management Bangalore.
Hadi, M. M. (2004). The importance of accounting information to the investors in banking sector in Kuwait. Working paper, University of Kuwait.
Hayn, C. (1995). The Information Contents of Losses. Journal of Accounting and Economics, 20(2), 125-153.
Jang, J. I., Jung, H. J., & Lee, K. J. (2002). The Value Relevance of Accounting Earnings and Book Value. Daehan. Journal of Business, 513-53, printed in Korean.
Keener, M. H. (2012). The Relative Value Relevance of Earnings and Book Values across Industries. Journal of Finance and Accounting, 3(2), 9-19.
Lev, B. (1989). On The Usefulness of Earnings and Earnings Research: Lessons and Directions from Two Decades of Empirical Research. Journal of Accounting Research, 27(3), 153-92.
Manganaris, P., Spathis, C., & Dasilas, A. (2016). How institutional factors and IFRS affect the value relevance of conservative and non-conservative banks. Journal of Applied Accounting Research, 17(2), 211-236.
Mostafa, W. (2017). The impact of earnings management on the value relevance of earnings Empirical evidence from Egypt. Managerial Auditing Journal, 32(1), 50-74. DOI 10.1108/MAJ-01-2016-1304
Ohlson, J. A. (1995). Earnings, Book Values and Dividends in Equity Valuation. Contemporary Accounting Research, 11(2), 661-687.
Paglietti, P. (2009). Earnings Management, Timely Loss Recognition and Value Relevance in Europe Following The IFRS Mandatory Adoption: Evidence from Italian Listed Companies. Business and Management Sciences International Quarterly Review, 4(1), 97-117.
Pervan, I., & Bartulovic, M. (2014). Value Relevance of Accounting Information: Evidence from South Eastern European Countries. Economic Research-Ekonomska Istraživanja, 27(1), 181-190.
SET. (2015). Industry-Group-Sector-Classification. Retrieved from https://www.set.or.th/th/products/index/files/2015-2-12_SET-Industry-Group-Sector-Classification-Final-version_V1.pdf
_____. (2015). Manual Guides : Key Statistics, Financial Ratios and Glossary. Retrieved from https://www.set.or.th/th/market/files/SET_Formula_Glossary_Jun2015.pdf
TFAC. (2015). Conceptual Framework for Financial Reporting (2015). Retrieved from http://www.tfac.or.th/upload/9414/NOxoIsj0qL.pdf
Tsalavoutas, I., Andre, P., & Evans, L. (2012). The Transition to IFRS and the Value Relevance of Financial Statements in Greece. British Accounting Review, 44(4), 262-277.
Vichitsarawong, T (2011). The Value Relevance of Earnings and Cash Flows: Evidence from Thailand. Journal of Accounting Profession, 7(19), 39-53.
Vijitha, P., & Nimalathasan, B. (2014). Value Relevance of Accounting Information and Share Price: A Study of Listed Manufacturing Companies in Sri Lanka. Merit Research Journal of Business and Management, 2(1), 1-6.
Wadhanapatee,S., Bialowas, P., & Phuangsup, W. (2012). Tests of Market Efficiency in the Stock Exchange of Thailand in the Perspective of US Monetary Policy Announcements. Suddhiparitad Journal, 26(79), 109 –130.
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Published
2020-06-16
How to Cite
Phakdee, A. ., & Srijunpetch, S. (2020). The Value Relevance of Accounting Information in Financial Industry : 15-Year Perspective. Journal of Business Administration The Association of Private Higher Education Institutions of Thailand, 9(1), 196–214. Retrieved from https://so02.tci-thaijo.org/index.php/apheitvu/article/view/242893
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