The Relevance of Accounting Information in the Process of Valuation of Companies in the New and Old Economy – An Analysis of Asset Investments and their Effects on the Value Relevance of Earnings and Book Value

Amaury José Rezende
Additional contact information
Amaury José Rezende: Federal University of Mato Grosso do Sul

Brazilian Business Review, 2005, vol. 2, issue 1, 33-52

Abstract: Brazilian accounting principles permit companies to capitalize expenditures on research and development, specifically as deferred charges. Therefore, the objective of this article is to analyze the effects of (deferred) investments on the value-relevance of the earnings and net equity of companies operating in the so-called new and old economies, with the sectors of the old economy chosen as comparison. The more specific objective is to examine: (i) the explanatory power of earnings and net equity; (ii) the incremental explanatory power of deferred charges, in which the stock price is a function the net earnings plus net equity less deferred charges. This study does not seek to refute or prove a specific model, but rather only to gather evidence to permit accepting or rejecting the hypotheses formulated and to offer a response to the research question. The results show that accounting information, for both sectors, is relevant to value the price of shares. However, the results on the explanatory power of deferred charges run counter to the expected results.

Keywords: accounting information; value relevance. (search for similar items in EconPapers)
Date: 2005
References: View complete reference list from CitEc
Citations:

Downloads: (external link)
http://bbronline.com.br/index.php/bbr/article/download/484/732 Full text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bbz:fcpbbr:v:2:y:2005:i:1:p:33-52

Access Statistics for this article

Brazilian Business Review is currently edited by Emerson Mainardes

More articles in Brazilian Business Review from Fucape Business School Fucape Business School Brazilian Business Review Av. Fernando Ferrari, 1358, Boa Vista CEP 29075-505 Vitória-ES. Contact information at EDIRC.
Bibliographic data for series maintained by Sarah Lasso ( this e-mail address is bad, please contact ).