Value relevance of accounting information: an emerging country perspective
Journal of Accounting & Organizational Change
ISSN: 1832-5912
Article publication date: 8 November 2018
Issue publication date: 20 November 2018
Abstract
Purpose
This paper aims to examine the value relevance of accounting information from an emerging country perspective.
Design/methodology/approach
The study adopts Ohlson (1995) Price model to examine the extent to which accounting information explain variation in stock prices of listed firms on the Ghana Stock Exchange.
Findings
The study reveals that earnings and book value of equity exhibit a positive and significant relationship in stock prices. Earnings explain higher variation in stock market values on the Ghana Stock Exchange compared to book value of equity. The study however finds that despite the introduction of the International Financial Reporting Standards in Ghana, the value relevance of book value and earnings have declined significantly over the period 2005-2014.
Research limitations/implications
A key implication is that regulators of capital markets, standards setters and accounting practitioners need to consistently improve upon the quality of financial reporting disclosures which will boost the confidence of users in their reliance on financial statements as the basis for choosing among alternative use of scarce resources. The authors adopted only the price model in testing the hypotheses. However, to provide comprehensive understanding of value relevance of accounting information, future studies can combine both the price and the return models.
Originality/value
The authors extend prior literature in the Ghanaian context with recent data. Finally, the study adds to the efficient market hypothesis by showing how share prices reflect accounting information produced by Ghanaian firms.
Keywords
Citation
Badu, B. and Appiah, K.O. (2018), "Value relevance of accounting information: an emerging country perspective", Journal of Accounting & Organizational Change, Vol. 14 No. 4, pp. 473-491. https://doi.org/10.1108/JAOC-07-2017-0064
Publisher
:Emerald Publishing Limited
Copyright © 2018, Emerald Publishing Limited