"Value relevance of accounting information : emphasis on the financial crisis in 2008
Master thesis
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http://hdl.handle.net/11250/135510Utgivelsesdato
2010Metadata
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Sammendrag
Macroeconomic instability may increase the probability of default and accelerated to financial
collapse, which consequently have an impact on value relevance of accounting information. The
objective in this study is to enhance the understanding of value relevance in the Norwegian stock
market with emphasis on which consequences the financial crisis in 2008 had on value relevance.
Given the considerable amount of value relevance research throughout time, it is impossible to
adequately summarize the entire field, hence, this study presents a comprehensive review of the
major areas in value relevance literature to give the reader an in-depth understanding. Empirical
analysis is further applied where a test of general value relevance of accounting information is
conducted. Regression analysis determines accounting information’s ability to explain variations
in the stock prices using data samples of Norwegian firms listed on the Oslo Stock Exchange
Benchmark Index. The study further concerns variations in the explanatory power of accounting
information during the crisis period.
Empirical analysis presents evidence confirming my prediction that accounting information
denoted in earnings and equity book value are value relevant to investors in the Norwegian stock
market. Regardless of which model specification applied, the variability in share prices are
consistently better explained by equity book value relative to earnings. The overall results from
investigating the value relevance of accounting information during the financial crisis in 2008,
shows that the total value relevance has increased significantly, attributable to a substantial
increase in the explanatory power of book value. This implies that investors valued accounting
information higher during the crisis period. As predicted, results report a considerable increase in
the explanatory power of book value and a decrease in the explanatory power of earnings.
Key words: Value relevance, earnings, equity book value, financial crisis.
Beskrivelse
Masteroppgave i økonomi og administrasjon - Universitetet i Agder 2010