Value Relevance of Inflation-adjusted Equity and Income

Kırkulak, Berna; Balsari, Cagnur Kaytmaz

doi:10.1016/j.intacc.2009.09.007

Cited by 22 publications

(38 citation statements)

References 16 publications

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“…This supports the study major findings that accounting accruals are value relevant. Kirkulak and Balsari (2009) analyse the effect of inflation adjusted data on explaining the market value of equity and stock returns in Turkey. They find that both historical cost-based book value and earnings information and inflation adjusted information are value relevant and they complement each other.…”

Section: Review Of Literature and Hypotheses Developmentmentioning

confidence: 99%

The Value Relevance of Accounting Information: Evidence from Nigeria

Omokhudu¹,

Ibadin²

2015

AFR

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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 paper uses the basic Ohlson (1995) model and the modification of the model that includes cash flow from operation, and dividends, to ascertain the value relevance of accounting information in Nigeria. The paper accommodates the documented relative inefficiency of the market by using stock price at three months and six months after year end as dependent variable. The study employs a pooled and 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, cash flow and dividends were statistically significantly associated with firm value but book value was related but not statistically significant. Based on these findings, it is suggested that the focus of investors should be on earnings, dividends and cash flows while less emphasis be placed on book values. 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

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Section: Review Of Literature and Hypotheses Developmentmentioning

confidence: 99%

The Value Relevance of Accounting Information: Evidence from Nigeria

Omokhudu¹,

Ibadin²

2015

AFR

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“…In Turkey value relevance of accounting information has also been analyzed in several perspectives. Kirkulak and Balsari (2009) analyzed the effect of inflation-adjusted data on explaining the market value of equity and stock returns in Turkey. They reported that both historical cost-based book value and earnings information and inflation-adjusted information are value relevant and they complement each other.…”

Section: Previous Studies Related To Impact Of Ifrs On Value Relevancmentioning

confidence: 99%

The Impact of IFRS on the Value Relevance of Accounting Information: Evidence from Turkish Firms

Karğın¹

2013

IJEF

157

104

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Value relevance is being defined as the ability of information disclosed by financial statements to capture and summarize firm value. Value relevance can be measured through the statistical relations between information presented by financial statements and stock market values or returns. In many studies, Ohlson model (1995) has been adopted to explore relationships among the market value of equity and two main financial reporting variables, namely the book value of equity per share (represents balance sheet) and earnings per share (represents income statement). This study investigates the value relevance of accounting information in pre-and post-financial periods of International Financial Reporting Standards' (IFRS) application for Turkish listed firms from 1998 to 2011. Market value is related to book value and earnings per share by using the Ohlson model (1995). Overall book value is value relevant in determining market value or stock prices. The results show that value relevance of accounting information has improved in the post-IFRS period (2005)(2006)(2007)(2008)(2009)(2010)(2011) considering book values while improvements have not been observed in value relevance of earnings.

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“…In [32], the authors use an earnings and book value model and report that inflation-adjusted numbers prepared in accordance with Mexican accounting rules and US Generally Accepted Accounting Principles (GAAP) are both value relevant. The only study based on Turkish firms is [2], where the authors find that inflation- Similarly, most of the research on the value relevance of IFRS-based accounting numbers has been carried out in developed markets. [33] shows that disclosure quality has increased significantly under both mandatory and voluntary adoption of IFRS.…”

Section: Value Relevance Of Accounting Reformsmentioning

confidence: 99%

“…In [3,4], the authors find that NI/share and BV/share are both significant and explain 57.5% of the variation in stock prices, but there is a steep decline in the value relevance of both variables during the 2000-2001 financial crisis that has increased the incidence of losses. In summary, only [2][3][4] have used both book values and earnings in their tests of value relevance in the BIST. However, none of these papers investigate the specific impact of any of the accounting and financial reporting reforms we examine in this study.…”

Section: Value Relevance Studies Using Turkish Datamentioning

confidence: 99%

“…Although this relationship has been tested on Turkish data (for example, see [2][3][4]), this chapter uses a much longer sample period, which allows us to evaluate the impact of a series of accounting reforms on the strength of the association. Moreover, this is the first study to exploit the interesting sequence of accounting and financial disclosure reforms that follow one another during the 2003-2006 period, to come up with comparative value relevance testing designs and results for all major voluntary and mandatory reforms, which we believe will be instructive for all emerging markets and developed economies also undergoing similar reforms and best practices.…”

Section: Introductionmentioning

confidence: 99%

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Value Relevance of Accounting Data in an Emerging Market: Did Accounting Reforms Make a Difference?

Aksu¹,

Çetin²,

Mugan³

2017

Accounting and Corporate Reporting - Today and Tomorrow

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This study investigates the association of accounting earnings (NI) and book value of equity (BV) with stock prices in Istanbul Stock Exchange (ISE), currently Borsa Istanbul (BIST), during the 1992-2006 period. We also explore the effect of accounting reforms on value relevance that is measured as the strength of the association between a firm'sNIand BV and its market value. We specifically investigate the impact of the Turkish Uniform Chart of Accounts (1994), mandatory inflation accounting, consolidations and voluntary (2003)(2004), and the mandatory (2005) adoption of International Financial Reporting Standards (IFRS). We hypothesize that these reforms have reduced information asymmetry and thus are expected to enhance the value relevance of accounting information. We find strong evidence that the Ohlson model is a valid model, and BV is more value relevant than NI in BIST. We also find that inflation accounting and consolidations have enhanced the value relevance of BV, while IFRS has increased the value relevance of NI, but reduced that of BV. We contribute to the debate by exploiting the unique sequence of reforms, to come up with comparative value relevance testing designs and interesting results for all major reforms, which we believe will be instructive for researchers and for all emerging and developed economies undergoing similar reforms and best practices.

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Value Relevance of Inflation-adjusted Equity and Income

Cited by 22 publications

References 16 publications

The Value Relevance of Accounting Information: Evidence from Nigeria

The Value Relevance of Accounting Information: Evidence from Nigeria

The Impact of IFRS on the Value Relevance of Accounting Information: Evidence from Turkish Firms

Value Relevance of Accounting Data in an Emerging Market: Did Accounting Reforms Make a Difference?

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