The relationship between competitive advantage and the value relevance of accounting information

Sang-Lyul Ryu and Jayoun Won

International Journal of Trade and Global Markets, 2018, vol. 11, issue 1/2, 118-126

Abstract: This study examines the relationship between competitive advantage and the value relevance of accounting information. The advantage that a firm has over its competitors can be defined as its relative efficiency in transforming the performance of key success factors into the firm's profitability. We classify firm-year observations into lifecycle stages and measure the efficiency using data envelopment analysis (DEA) in each of the different lifecycle stages. Our results indicate that the efficiency has a positive relationship with the stock price of a firm and decreases (or increases) the value relevance of book value per share (BPS) (or earnings per share (EPS)). The current study captures a firm's competitive advantage by a single efficiency score and reveals that the efficiency has a positive impact on firm value.

Keywords: competitive advantage; firm lifecycle; DEA; data envelopment analysis; value relevance; accounting information; efficiency. (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:ids:ijtrgm:v:11:y:2018:i:1/2:p:118-126

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