The value relevance of accounting information in the MENA region

Abstract

Purpose The purpose of this paper is to examine the value relevance of accounting information in the Middle East and North Africa region (MENA) region with an emphasis on the potential impact of IFRS adoption. This paper aims to not only examine the value relevance of accounting information in the MENA region but also draw comparisons between Gulf countries (GCC) and non-GCC country firms to determine whether there are distinct differences across the two regions. Design/methodology/approach To investigate the value relevance of accounting information in the MENA region, two pooled regression models are used based on the Ohlson (1995) model. The first regression model is conducted for the GCC and non-GCC regions separately. A second regression model is conducted using a pooled sample of the MENA region collectively with dummy and interaction variables to further explore the potential differences between the two regions in terms of the value relevance of accounting information. Findings The empirical results show that the measures of accounting information have a highly significant positive relationship with the market value per share for firms in the MENA region, thereby indicating that accounting information in the MENA region is value relevant. Although book value per share and earnings per share are significant determinants of value relevance in both GCC and non-GCC country firms, operating cash flows per share is only a significant determinant of value relevance in non-GCC country firms. The research findings of the study also show a significant negative impact of IFRS adoption on the value relevance of accounting information in the MENA region. Practical implications This research paper provides important insights for investors and regulators by providing evidence that accounting information is value relevant in the MENA region, and that IFRS adoption does not necessarily lead to a greater degree of value relevance. In fact, investors and regulators should be aware that the adoption of IFRS in MENA country firms results in diminished value relevance of accounting information. This finding is of particular significance to policymakers attempting to improve accounting disclosure. Originality/value The paper expands the value relevance of accounting information literature in the context of developing economies, in general, and the MENA region, in particular. There is a paucity of research into the value relevance of accounting information for MENA country firms, particularly in the case of the impact of IFRS adoption. Thus, this paper provides an important contribution in terms of expanding the value relevance literature in relation to IFRS adoption in the MENA region.

Fi̇rma Pi̇yasa Değeri̇ İçi̇n Muhasebe Ve Ekonomi̇k Veri̇leri̇n Anali̇zi̇: Holdi̇ng Fi̇rma Uygulamasi

“…The results of this study are consistent with the model results obtained by Ohlson (1995), which accounting and non-accounting data affect the market value of firms. Besides, these findings coincide with the results obtained by Willett (2003), Cooke et al (2009) Bhargava (2014 for, Eriabie & Egbide (2016), El-Diftar & Elkalla (2019 and Camilleria et al (2019). However, the findings of this study in Turkey are not in line with the results of Elbakry et al (2017) for German and U.K.…”

The impact of IFRS adoption on the value relevance of accounting information in Saudi Arabia

“…Another similar study by Albarrak (2011) reported that the accounting information was value relevant (as indicated by the R 2 results) throughout the study period. A more recent study by El‐Diftar and Elkalla (2019) compares value relevance among the MENA region countries. Their findings suggest IFRS had a negative impact on the value relevance of the studied groups.…”

“…A review of prior relevant literature shows several limitations in conducting the analysis of value relevance research: for example, improper implementation of models (Belassi and Elbarrad, 2020), neglecting the use of a deflator (Alnodel, 2018), using a multi‐country comparison by overlooking the country‐specific context (El‐Diftar and Elkalla, 2019), using a small sample size (Oraby, 2017), ignoring the use of valuation models (Ebaid, 2021) or failing to use the R 2 comparison tests (Oraby, 2017; Alnodel, 2018). Therefore, a more refined research design is necessary to provide more valid results on the impact of IFRS adoption on the value relevance of accounting information of listed firms on the Saudi stock market.…”

Does accounting details play an allocative role in predicting macroeconomic indicators? Evidence of Bayesian and classical econometrics in Iran

“…In this respect, conducting research into income influential items at the firm level may be useful for many financial statements users, including boards of directors, managers, auditors, financial analysts, policy makers and regulators. The firm-level information is associated with most engaging uses of income and its related items such as compensation, debt, supply and licensing contracts (Givoly and Palmon, 1982; Zeghal, 1984; Dhaliwal et al , 2008; Haw et al , 2015; Kim and Zhang, 2016; Badu and Appiah, 2018; Salehi et al , 2018; Barth et al , 2019; El-Diftar and Elkalla, 2019; Salehi et al , 2019; Salehi et al , 2020). Therefore, a substantial amount of evidence is obtained from extensive firm-level literature.…”