Porcentaje de subjetividad Según Kerbrat-Orecchioni:

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(1991) find that financial ratios within a group are highly correlated. Horrigan (1965) suggests that the selection of a surrogate financial ratio from a group be based on empiricism but this can be subjective. A plausible scheme would be to use the mean value of all ratios within the group or a data orientation approach may be used.

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the more usual stock returns-based analysis, on grounds that the parameters estimated using valuation models are reasonably close to those expected from theory, and that the explanatory power of such models is relatively high. Kothari & Zimmerman (1995) also promote the superiority of valuation models over the return models. Landsman & Magliolo (1988) argue that the advantages of one approach over the other are largely dictated by what the researcher wishes to assume. Gu (2005) suggests that the choice of either levels or returns model depends on the researcher’s belief and research question at hand rather than any scale factor concerned. Given this historic debate, there appear to be no theoretical justification for the superiority of return models over valuation models.

Value relevance models, whether stock-return or valuation base methodology, can take a simple form whereby market value or stock return is expressed as a linear function of book values and earnings, or a linear combination of book value, earnings, research and development expenditure, dividends, capital contributions, and other information (Akbar, Stark & Shah, 2011). The inclusion of many control variables in a model increases the explanatory power (Akbar & Stark, 2003) but such proxies can include idiosyncrasies. A regression of book value of equity and earnings on stock return or share prices have been the subject of studies on ‘value relevance’ but Akbar, Stark and Shah (2011) partition earnings into cash flow and current accruals, and show that these have separate value relevance, and in particular, cash flows have incremental value relevance relative to both earnings and funds flow. This is expected because cash flow is an economic outcome (Barth, Landsman, Lang & Williams, 2012). Value relevance relates exogenous market variables to accounting measures to externally validate these accounting measures, and this is logical because accounting measures are intended to provide the market with new information or to confirm market expectations, and hence they influence market

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valuation. However, a germane question is whether value relevance models holds during times when market values behave erratically (cf. Elias, 2012). Table 2.5 is a summary of major studies on value relevance.

In the United Kingdom (U.K.), Iatridis (2010) investigates value relevance of the accounting amounts under U.K. accounting standards and IFRS. Three regression models were estimated for results to carryout the comparison. In the first model, the book value per share and net profit per share were regressed on share price; in the second model, net profit divided by beginning of year share price was regressed on stock return without consideration for cash dividend received; and in the third model, book value per share and total net profit per share were regressed on stock returns. A separate regression model was estimated for pre-official and official periods so that explanatory powers and coefficients are compared in order to detect higher value relevance.

Iatridis finds that the adoption of IFRS has led to more value relevant accounting measures.

Clarkson, Hanna, Richardson & Thompson (2011) conduct a similar study in Europe and Australia. The study involves firms from 15 countries among which the U.K., Australia and Ireland are the common law countries. They find that the adoption of IFRS has no impact on value relevance of market participants in common law countries. In addition, after adoption and implementation, value relevance of market participants in the two groups of countries became equal, suggesting that IFRS enhances comparability. Zeghal, Chtourou & Fourati (2012) replicate this study, comparing characteristics of accounting numbers in the pre-mandatory IFRS adoption period (2002−2004) and the post-mandatory IFRS adoption period (2006−2007) and find less value relevance after the implementation of IFRS.

61 Table 2.5

Studies on adoption effect of IFRS on Value relevance

S/N Authors & countries Major findings

1. Iatridis, 2010, U.K. Increased value relevance.

2. Clarkson, Hanna, Richardson and Thompson, 2011; Europe and Australia.

No impact on value relevance of common law countries;

value relevance of code law countries becomes equal to that of common law countries.

3. Zeghal, Chtourou & Fourati, 2012;

Europe and Australia.

Less value relevance.

4. Gaston, Garcia, Jarne & Gadea, 2010;

Spain and U.K.

More value relevance in both countries.

5. Elias, 2012; Australia. Increased value relevance.

6. Dimitropoulos, Asteriou, Kousenidis, and Leventis, 2013; Greece.

Increased value relevance.

7. Liu, C., Yao, Hu, & Liu, L., 2012;

China.

Higher value relevance.

8. Elshandidy, 2014; China. Increased value relevance.

9. Elbannan, 2011; Egypt. Decrease in value relevance.

10. Outa, 2011; Kenya. Mixed results: some metrics indicate marginal increase; some decrease.

11. Ames, 2013; South Africa. No improvement in value relevance.

12. Anandarajan & Hasan, 2010; Egypt, Israel, Jordan, Lebanon; Morocco, Tunisia, and Turkey.

Increase disclosure leads to more value relevance; legal and economic environment, foreign ownership and multinational activities influence value relevance.

13. Khanagha, 2011; Bahrain and United Arab Emirate (UAE).

Value relevance increase in Bahrain but decline in UAE.

14. Eng, Sun & Vichitsara, 2014; U.S. No significant difference in value relevance.

15. Barth, Landsman, Lang &Williams, 2012; U.S.

With firms from code law countries, U.S. GAAP have higher value relevance than IFRS; comparable results are obtained for firms with common law countries.

16. Grossman, Smith & Tervo, 2013;

U.S.

No significant difference in value relevance.

Source: Review of empirical studies on value relevance of earnings and equity by the researcher, 2015

Gaston, García, Jarne & Gadea (2010) compare the gap between book value and market value under local GAAP and IFRS for Spain and the United Kingdom. Spain is a code law country whilst U.K. is a common law country. They find that the gap between book value of equity and market value of equity is higher under IFRS than under local GAAP in both countries, suggesting that the implementation of IFRS impacts on value relevance of accounting data in both countries. Elias (2012) also investigates the impact of mandatory adoption on accounting quality in Australia and finds increased value relevance. Dimitropoulos, Asteriou, Kousenidis, &

Leventis (2013) employ a before-and-after implementation design to examine accounting quality

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in financial statements prepared under Greece accounting standards and IFRS. Greece is a code law country and is a member of European Union. In the study, the pre-IFRS period is 2001 to 2004 whilst the post-IFRS period is 2005 to 2008. They use the explanatory power of a regression of net income and book value of equity on stock prices with proxies to control size, risk, growth and profitability to detect value relevance and find that the adoption of IFRS leads to greater value relevance of earnings and book values.

Liu, C., Yao, Hu & Liu, L. (2011) examine the impact of IFRS on accounting quality in China.

The Chinese economy is highly regulated; it is classified as an emerging economy. They find improvement in accounting quality with significantly higher value relevance of reported earnings. Also in China, Elshandidy (2014) investigates value relevance of accounting data after the adoption of IFRS. The study uses a before-and-after design to detect whether convergence of IFRS with Chinese Accounting Standards leads to higher value relevance. The study also includes companies operating in Hong Kong, so that the analysis includes Hong Kong accounting standards. The study finds that accounting data are value relevant under the Chinese and Hong Kong accounting standards but value relevance increase after convergence.

In Egypt, Elbannan (2011) investigates value relevance in the regime of IAS during the period 1997 to 2006. The government sets accounting standards through a ministerial body. However, in the absence of Egyptian accounting standards, International Accounting Standards are adopted. Egypt adopts IAS-based standards in 1997, which are later revised in 2002 and 2006.

The study uses a market value model, where Tobin’s q is used to generate a measure of market value. The study finds that the implementation of IAS affects firms’ market value negatively.

Outa (2011), using listed firms in Nairobi, Kenya, compares financial statements prepared under

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pre-IFRS and post-IFRS adoption to learn whether accounting quality has improved as a result of the implementation of IFRS. The outcome of the study shows mixed results: some metrics indicate a marginal increase in accounting quality; some decrease. Ames (2013) investigates accounting quality in financial statements of firms operating in South Africa. The study compares financial statements prepared before the adoption of IFRS with those prepared after the adoption. The study finds no improvement in value relevance.

Anandarajan & Hasan (2010) investigate how value relevance of accounting data is influenced by transparency, legal environment, source of accounting standards, and extent of foreign ownership in the local market. The study also investigates how institution specific characteristics such as size, risk, openness, economic environment and the extent of multinational activity impact value relevance. Companies were drawn across stock exchanges in Egypt, Israel, Jordan, Lebanon, Morocco, Tunisia, and Turkey. The study measures accounting quality with CIFAR accounting index, which is produced by the ‘Centre for International Financial Analysis &

Research’. The CIFAR index measures the proportion of 85 financial disclosures included in a representative sample of companies annual reports. Countries with higher CIFAR indexes are characterised by relatively greater financial disclosures; that is, more transparent, more intensive, and higher quality. The study finds that value relevance is affected by disclosure requirements of a country’s standard board. In particular, value relevance is more significant in countries that require greater disclosure of financial information and lowest in countries that had lesser levels of disclosure. Value relevance is greater when the private sector is involved than when it is purely government determined. Further, legal environment influences value relevance. Also, the involvement of foreign equity holders in local firms influenced value relevance; however, with

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respect to institutional specific characteristics, value relevance is not influenced by size and risk but by the extent of openness, economic environment, and multinational activity.

Khanagha (2011) investigates value relevance of accounting data to market participants in Bahrain and the United Arab Emirates (UAE). These are Middle Eastern countries. Companies in Bahrain are required to comply with IFRS in 2001 whilst those in UAE in 2003. The author uses the earning return model developed by Easton & Harris (1991) as modified by Biddle, Seow and Siegel (1995), and the popular price model that relates share prices to earnings and book value of equity to study value relevance on a before-and-after design. They complement their analysis with a portfolio approach that distinguishes long and short terms value relevance. The study finds that in Bahrain value relevance of accounting data increases after the implementation of IFRS but in UAE there is a decline in value relevance after the reform.

There are no studies in the literature that compare United States, or U.S, accounting standards with IFRS using only U.S. firms because the country is yet to adopt IFRS. The studies in the literature use an indirect approach which involves the use of non-U.S. firms that prepare financial statements in IFRS and restate them to U.S. accounting standings. Moreover, the restatement requirement has been cancelled, and as a result the management of a non-U.S. firm operating in the U.S. can decide to prepare financial statements using U.S. accounting standards or IFRS. Eng, Sun & Vichitsara (2014) compare value relevance of accounting data of non-U.S.

firms that adopt IFRS with those that adopt U.S. accounting standards, and find no significant difference. A pertinent question on this study is whether the firms in both samples are equivalent in essential aspects; for example, size, auditor’s identity, and so forth. Barth, Landsman, Lang

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and Williams (2012) match a sample of U.S. firms and non-U.S. firms using size and industry as matching coefficients. They find that U.S. accounting data generally have higher value relevance than IFRS accounting data with firms from code law countries but comparable results are obtained for firms from common law countries. However, this study also suffers from unmatched samples due to different reporting incentives and enforcement mechanisms. Grossman, Smith &

Tervo (2013) compare the value-relevance of IFRS data to market participants in the U.S. They use a multivariate framework to compare abnormal returns of European firms that prepare financial statements restated to U.S. accounting standards with U.S. firms listed in the New York Stock Exchange. They find that market participants do not place a premium on IFRS-based financial information than U.S. accounting standards-based financial information. Again, this study suffers from the same methodological flaws observed in Barth, Landsman, Lang &

Williams (2012). There are several other studies on value relevance in the U.S. but because the approach is not directly on the U.S. firms which prepare financial statements in U.S. accounting standards and the IFRS, these studies are not reported here.