Value Relevance of Financial and Non-Financial Information to Investor Decision

Abstract

The objective of this study is to examine the value relevance of financial and non-financial information to investor decision. Investors determine investment decisions from financial and non-financial information. In this research investor decision reflected on company's market performance, market performance is measured using Cumulative Abnormal Return (CAR). Financial information is measured using Return on Assets (ROA) and non-financial information using three components of Balanced Scorecard Method, which reflect, customer perspective, internal business process perspective, and learning and growth perspective. This study uses multiple regression to analyze the data of 121 manufacturing companies listed on Indonesia Stock Exchange (IDX) for the period 2010-2012. Sampling method in this research is conducted by the purposive sampling method. The findings show that the financial information which is measured by using the Return on Assets (ROA) was positively related to the market performance. On the other, from three components consist in non-financial information, customer perspective and internal busines and learning growth that has relation with market performance. Finally the results fully confirm the existence of a relationship between financial and non-financial information on market performance. Keywords: Cumulative Abnormal Return; Return on Assets; Customer Perspective; Internal Business Perspective; Learning andGrowth Perspective Ⅰ. IntroductionIn today's market, the changes in the business world from the industrial era into the information era are influenced by economic growth and technological advancement. Technological advancements can be used to obtain the information for the company to strengthen their market position. † Setianingtyas Honggowati Faculty of Economics and Business, Sebelas Maret University, Surakarta, Indonesia E-mail: setianingtyas_27@yahoo.co.id On the contrary, information of company's activities can be useful information to the other parties (e.g. regulators, competitors).Company's information was being able to effecting investor's and stakeholders decision-making processes. Chiung and Ming (2005) suggested that investment decision affect the company's market performance through stock price. Chiung and Ming (2005) suggested that investment decisions affect market performance through stock price. Then, the stock price changes reflect changes in the rate of expected returns or the rate of potential risks (Riley, Pearson and Trompeter, 2003;Wiersma,

Investor’s Reaction Towards Corporate Action and Financial Performance in Asia Financial Industry

“…Second, our finding is also consistent with previous studies in which financial information affects investor reaction positively and significantly [18].This finding indicates that investors relied on this information to make investment decisions. Positive investor reaction to financial performance is in accordance with efficient market hypothesis in which all publicly available information is fully reflected in the stock prices [49].…”

“…Much prior literatures mainly focused on the value relevance of either financial performance [1], [18], or corporate action [13], [19], [20] in making investment decisions individually. However, study investigating which do investors value more between the two remains unclear.…”

Relationship between Profitability Indicators and Maximization Market Value A dded a nd I ntr insic for the I ndustr ial Companies

“…The ratio serves as a measures of the company's financial performance throughout its existence. A Positive Market Value Added indicates successful financial management in maximizing shareholders' wealth (Setianingtyas, et al, 2015). Success in maximizing shareholders' wealth implies that shareholders receive returns surpassing their invested capital.…”

The Strategic Alignment of Management Accounting Information Systems, and Organizational Performance

“…To support and evaluate realization of the strategic benefits of AMT, MAIS must provide non-financial performance information that reflects and is aligned with strategic goals (Gates and Germain, 2015;Honggowati, Aryani and Rahmawati, 2015). Bouwens and Abernethy (2000) empirically found that the production systems of customization, which is the strategic focus of a firm, affect the design of MAIS.…”