VALUE RELEVANCE OF ACCOUNTING INFORMATION

ABSTRACT

Value relevance of accounting information addresses the degree to which accounting information summarizes the information that is impounded in share prices. Therefore, the purpose of this paper is to contribute to the empirical literature on value relevance by examining the extent to which accounting information is associated with firm value, from an emerging market context. The study employed a panel data in the regression of share price and returns on accounting numbers. The ordinary least square (OLS) estimation and dynamic model estimation, with the Random and Fixed effects variants were used in the regression. We find that earnings per share, book value per share, cash flow from operations was related positively but not statistically significantly associated with share price, but dividend per share was positively related and significantly associated with share price. Besides, the accounting information for investment purposes should be communicated to the investing public; and such information should be of high quality to avoid sub-optimal investment decisions by investors, with negative consequences for the overall economy