Earnings persistence and stock prices: empirical evidence from an emerging market

Abstract

Purpose – This study aims to investigate the persistence ability of accounting variables, namely, abnormal earnings, book value, accruals and cash flows over a period of time and their valuation relevance in Indian scenario. Design/methodology/approach – The study utilizes the generalized version of the Ohlson model which links market prices with abnormal earnings, book value and earning components (accruals and cash flows). Fixed-effect panel data regression is used to analyze six years of data on the sample units to determine the persistence and valuation relevance. Findings – The findings provide evidence on the construct of persistence and value relevance of earnings and book value of equity in the Indian context. The findings further confirm that investors in India are fixated on earnings and fail to attend separately to the cash flow and accrual components of earnings while undertaking their investment decisions. Practical implications – The empirical findings of the study will enable the analysts and investors to understand the relevance and persistence of accounting variables in case of an emerging market like India. Originality/value – The study extends the extant literature on value relevance studies in developed markets to an emerging market like India and enriches it in several ways.

Corporate governance factors as predictors of earnings management

“…In phase 2, the study explores predictive strength of firm attributes and CG mechanisms for EQ measured by the proxy in phase 1, which is statistically significant and close to explaining EM. The tested firm attributes and CG mechanisms are the ones which are prominently linked with EM and EQ in the literature and which are important aspects of the revised CG regulations (2014) in India. The study is based on 182 firms listed on S&P BSE 500 from FY 2000–2001 to 2017–2018.…”

The Value Relevance of Earning Measurement Using Ohlson Model: A Meta-Analysis

“…Relevance is also present in its correlation with equity market values and stock prices and at various levels of equity capital costs (12% and 8%). It was also successfully demonstrated in studies using data in developed capital markets like that of the USA (Bauman, 1999;Barth, et al, 1999;Landsman, et al, 2006) and those who use data from developing capital markets like India (Dawar, 2013(Dawar, & 2014. The results of the meta-analysis also suggest that abnormal earnings were derived from a homogeneous sample variant, so this proxy can be directly associated to stock prices or equity market values without moderating variables, which in the Ohlson model are book values and other information.…”

أثر نوع رأى مراقب الحسابات ودرجة تخصصه الصناعى على إستمراریة الأرباح: دراسة تطبیقیة على الشرکات المقیدة بالبورصة المصریة

“…; Bartov et al, 2001;Butler et al, 2004 (Oei et al, 2008;Lin & Yu, 2015;Dawar, 2014;Richardson et al, 2005;Zohdi et al, 2014;Dey & Lim, 2015;Clinch et al, 2012 Zhang, 2007Dawar,2014Sloan,1996;Richardson et al,2005;Clinch et al, 2012;Zohdi et al, 2014;Frankel & Litov,2009; (Choi & Jeter, 1992;Hadriche, 2015;Gajevszky, 2014;Tsipouridou & Spathis, 2013;Brain et al, 2011;Herbohn & Ragunathan, 2008;Francis & Krishnan,1999 (Rosner et al, 2003;Trigeorgis, 2007;Bradshaw et al, 2001;Bartov et al, 2001;Herbohn & Ragunathan, 2008; (Butler et al,2004;Tsipouridou & Spathis,2012;Lin et al,2011;Herbohn & Ragunathan,2008;Arnedo et al,2008;Hadriche,2015) ‫دى‬ ‫ف‬ ‫دت‬ ‫طبق‬ ‫ددة‬ ‫د‬ ‫المتح‬ ‫دات‬ ‫د‬ ‫الي‬ ‫الو‬ ‫دل‬ ‫د‬ ‫مث‬ ‫دات‬ ‫د‬ ‫اس‬ ‫در‬ ‫دت‬ ‫د‬ ‫بق‬ ُ ‫ط‬ ‫دين‬ ‫د‬ ‫ح‬ ‫دى‬ ‫د‬ ‫ف‬ ‫دا.‬ ‫د‬ ‫نس‬ ‫وفر‬ ‫دان‬ ‫د‬ ‫اليون‬ ‫و‬ ‫اليا‬ ‫دتر‬ ‫د‬ ‫أس‬ ‫و‬ ‫دبانيا‬ ‫د‬ ‫أس‬ ‫و‬ ‫دين‬ ‫د‬ ‫الص‬ ‫و‬ ‫دة‬ ‫د‬ ‫يكي‬ ‫األمر‬ (Rusmanto et al,2014;Gajevszky,2014;Johl et al,2007;Moghaddam et al,2016 Moghaddam et al,2016;Oei et al,2008;…”