Financial indicators, informational environment of emerging markets and stock returns

Abstract

Purpose -The purpose of this paper is to evaluate the influence of the informational environment on the relevance of accounting information in companies traded in stock exchanges of emerging markets.Design/methodology/approach -For this purpose, the authors calculated indicators based on figures derived from the financial statements and variables that sought to capture the influence of the economic and institutional environment. The sample consisted of publicly traded companies from 20 countries classified as emerging by Standard & Poors. Macroeconomic information was obtained through the International Country Risk Guide database. The analysis period ranged from 2004 to 2013, excluding missing data, variables considered as outliers, besides the exclusion of data from companies that presented negative equity.Findings -It was observed that the financial variables presented signs consistent with the literature, except for the price-to-book variable and the asset change variable. The inclusion of variables related to the accounting informational environment offered evidence that the more opaque the accounting environment in the country, the lesser the ability of the profits to portray the variations of stock returns. The variable that captured the adoption of international standards was consistent with expectations, i.e. the adoption of international standards would increase the quality of accounting information, showing a positive signal. Moreover, the variable aggressiveness of the earnings was statistically significant and negative, consistent with the literature.Research limitations/implications -The variables earnings smoothing and aversion to losses did not show the expected behaviour though, highlighting the possible limitations of these proxies used to capture the opacity of the earnings.Originality/value -When institutional moderators were included, it was observed that the adoption of the IFRS standards positively affected the relationship, which is more relevant when the accounting figures were under its aegis. Recently, countless nations' transition to international accounting standards has been justified by the need to use high-quality reporting standards. The research sought to contribute to strengthen this dimension, presenting evidence that the dummy variable included to capture the adoption of international standards had a positive effect on the relationship.

The relevance of financial and economic informational environment: evidence from South Asian markets

“…Application of international accounting standard (IAS) indicator seems to be compatible with literature except in Model (1) as, Barth et al (2008) and Takamatsu and Lopes-F avero (2019) and indicate that adoption of IAS would enhance the standardization in accounting data that turn as a moderator to determine the influence of accounting data to explain the variations in South Asian equity markets returns. The result indicate that adoption of IAS in South Asian Economies (India, Pakistan, Bangladesh, Sri Lanka and Nepal) is beneficial to investors and other users of financial statements by reducing the costs of comparing investment opportunities and increasing the quality of information.…”

“…Capital investment is significant and negative associated with the return that is aligned with Fama and French (2016) indicate that the negative abnormal capital investment relation is independent of the previously documented long-term return reversal and secondary equity issue anomalies, while on the other side, accrual shows an insignificant presence along with positive coefficient because of estimation of accruals form balance sheet approach and are persistent with (Baloch, 2015) and (Takamatsu and Lopes-F avero, 2019). Findings of Gross profitability was compatible with Takamatsu and Lopes-F avero (2019) and shows that higher profitability tends to have incremental effect in stock return while sale growth shows significant association with negative coefficients value except in Model (1) and indicate that intrinsic risk of a firm would be reduced with the higher amount of investment.…”

“…Substantial studies relevant to asset pricing and corporate finance demonstrate that market information must be undertaken by individual and institutional investors while developing a diversified and efficient portfolio. Li and Sullivan (2015) and Takamatsu and Lopes-F avero (2019) documented variations in the case of comparative studies among firms and economies based on an institutional setting, legal structure, corporate governance, adoption, and application of accounting standards. Chen, Roll and Ross (1986) recognized some macro variables such as gross domestic product, consumer price index, and the term structure of interest rate as the replacement of CAPM beta and documented that this variable has more explanatory power for stock return.…”

“…Alternative means might be deliberated to estimate the intensity of adoption of audit standard and financial reporting, measured through quality perceived accounting procedure (Knack and Xu, 2017) and (Takamatsu and Lopes-F avero, 2019). Following the scope of our study, we engaged the earning properties to estimate the quality standard for accounting and The relevance of informational environment auditing prevailed in a particular economy.…”

نحو رؤية تطبيقية أکثر واقعية لتقييم المرکز التنافسي للمعلومات المحاسبية وفق مدخل القدرة التفسيرية: دراسة حالة مقارنة بين المعلومات المحاسبية والبيانات السعرية

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