ARTICLE REVIEW 1

VALUE RELEVANCE OF
ACCOUNTING INFORMATION :
AN EMERGING COUNTRY
PERSPECTIVE
MOHD FIERDAUS BIN AKOP
G7 MOHD AZMAN BIN MAASOM
 04 LITERATURE REVIEW

05 CONCLUSION

01 INTRODUCTION 06 FINDINGS

02 OBJECTIVE 07 LIMITATION

03 RESEARCH METHOD
01 - INTRODUCTION

The objective of general purpose financial reporting is to provide financial

information about the business that is useful to present and potential equity
investors, lenders and creditors in making decisions in their capacity as capital
providers (IASB, 2010).

A key contribution of the paper is to demonstrate the relevance of accounting

information to investors in an emerging market.
02 - OBJECTIVE

Purpose to examine the value relevance of accounting information from an

emerging country perspective in Ghana.
03 - RESEARCH METHOD

Ohlso (1995) Price model. This model implies that the value of the firm is
equals to the sum of the book value of equity and the present value of
expected abnormal earnings.

In this case:
To determine the extent to which accounting information explains variation in
stock prices of listed firms on the Ghana Stock Exchange. The study period
spans from 2005 to 2014.
04 - LITERATURE REVIEWS

Bowerman and Sharma, 2016

Information used by investors is said to be impounded into the stock price of a
firm, thus reflecting the present value of a firm’s future economic benefits.

Kargin (2013)
Overall, book value is relevant in determining market value or stock prices of
Turkish listed firms from1998 to 2011.

Collins et al. (1997)

Book value and earnings seemed to have increased marginally over time for
companies in the USA between 1953 and 1993.
04 – LITERATURE REVIEWS - CONTINUED

Fiador (2013)
Examines corporate governance and the usefulness of financial information
in the Ghana Stock Exchange. The author establishes that book value is
substantial in explaining share prices.

Beisland (2009)
Book value of equity and earnings are generally associated with stock prices
and stock returns

Chandrapala (2013)
Attempts to measure the informativeness of earnings and book value in the
Colombo Securities exchange over the 2005-2009 period. The outcome
demonstrates that the joint predictive power of the two variables is below
expectation, and this is akin to the past finding of the researcher.
05 – FINDINGS

Book values and earnings are statistically significant in explaining

variation in share prices.(H1,H3,H4,H5)

H1: Earnings and book value are value relevant to GSE investors.
H3: Book value is more value relevant than earnings in the presence of negative earnings.
H4: Larger firms explain higher variation in stock prices than smaller firms
H5: Book value is more value relevant than earnings in the services & industry sector

However this study also finds that : introduction of IFRS in Ghana (H2) , the value relevance of
books value and earning declined significantly.
06 – CONCLUSION

• The findings of the usefulness of earnings and book value disclose that
investors depend profoundly on earnings in equity valuation.

• These findings also suggest that market participants in the Ghanaian

Capital market depend on earnings figures much higher relative
to shareholders in the developed stock markets.
07 – LIMITATION

The study Only adopt one Price Model- Ohlson (1995)

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