Coincident and forecast relevance of accounting numbers
Abstract
Purpose
Value relevance studies, in particular international comparative studies, use market values sampled at different dates relative to the fiscal year-end. This paper aims to contribute a theoretical and empirical analysis of the relationship between value relevance and the month of market value sampling.
Design/methodology/approach
The paper examines two components of value relevance, coincident relevance and forecast relevance, which the paper develops on the basis of the Ohlson model. The paper measures value relevance by estimating separate panel-data regressions for each of the 12 months around fiscal year-end. The sample consists of companies listed in two continental European countries, France and Germany, over the 1989-2008 period.
Findings
In both country panels, the paper finds that overall value relevance is higher when market value is sampled before or close to fiscal year-end, but incremental value relevance varies between domestic and International Financial Reporting (IFRS) accounting standards. Regression results reveal significant variations in coefficients over the following months of market value in French panel and its IFRS sub-sample only.
Research limitations/implications
The scope of the study is limited to the average value relevance parameters of companies listed on stock exchanges in France and Germany. Future research may be devoted to other countries and study additional determinants of value relevance.
Practical implications
The study shows that the selection of the month of market value sampling can have significant impact on value relevance regression results. Therefore, sensitivity analysis needs to be included in research studies which rely on the value relevance approach.
Originality/value
The paper contributes the first systematic analysis of the variation in value relevance parameters in response to the selection of the month in which market value is sampled.
Keywords
Acknowledgements
The authors would like to acknowledge the helpful comments of Katerina Hellström, Ian Kwan, Jeroen van Raak and the participants of the 2010 Annual Congress of the Association Francophone de Comptabilité, the Global Finance Conference in 2010, the 2011 FindEcon Conference and the 2011 Annual Congress of the European Accounting Association. On the early stages of inventing the concept of coincident and forecast relevance, the authors published (under different titles) two papers in post-conference materials only. It was after the 2010 Annual Congress of the Association Francophone de Comptabilité (Valuation Effects of Accounting Information Availability) and FindEcon'2011 Conference (Divergent Patterns of Value Relevance).
Citation
Marek Klimczak, K. and Szafranski, G. (2013), "Coincident and forecast relevance of accounting numbers", Accounting Research Journal, Vol. 26 No. 3, pp. 239-255. https://doi.org/10.1108/ARJ-09-2012-0076
Publisher
:Emerald Group Publishing Limited
Copyright © 2013, Emerald Group Publishing Limited