 Industry upheaval and valuation: Empirical evidence from the international oil and gas industryBård Misund, Frank Asche and Petter Osmundsen The International Journal of Accounting, 2008, vol. 43, issue 4, 398-424 Abstract: Accounting literature suggests that contemporaneous earnings are more useful than current operating cash flow in predicting future cash flows and, therefore, also more relevant for company valuation. However, recent research indicates that elevated levels of merger and acquisition activity or a changing economic environment may reduce the value relevance of earnings. Using the oil and gas industry as a case, this paper examines how the oil industry upheaval in the late 1990s influenced the value relevance of financial statement information. We extend the literature by testing for a structural shift in the equity market valuation process. Our results provide evidence of a structural break in the value relevance of accounting information. In contrast to prior research, we find that the value relevance of cash flows actually decreased in the recent oil industry upheaval. On the other hand, the value relevance of book equity increased. Furthermore, we find that accounting-method choice (full cost versus successful efforts) affects the value relevance of accounting information. Keywords: Company; valuation; Value; relevance; Earnings; quality; Oil; and; gas; industry (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:accoun:v:43:y:2008:i:4:p:398-424 Access Statistics for this article The International Journal of Accounting is currently edited by A. R. Abdel-Khalik More articles in The International Journal of Accounting from Elsevier |
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