Empirical evidence of the effect of European accounting differences on the stock market valuation of earnings and book value

Miguel Arce and Araceli Mora

European Accounting Review, 2002, vol. 11, issue 3, 573-599

Abstract: Recently, a new dimension has been added to research in accounting harmonization by studying the effects of accounting practices and regulations on share price and return movements. Although there is an agreement of mutual recognition in the European stock markets of financial statements adapted to the directives, the differences between the European countries are still great. The objective of this study is to investigate the value relevance of alternative accounting measures (earnings and book value) constructed under different accounting systems in Europe. We investigate the differences in accounting practices through the relationship between earnings and book value, and the stock market value of the firm. The aim of the study is to answer the following three questions: (1) Are there systematic differences in value relevance between earnings and book value across the different European accounting systems? (2) Do book value and earnings convey different information to stock valuation? (3) Are accounting numbers more value relevant in those countries traditionally orientated to market investors? The sample consists of listed firms from eight European countries (Belgium, France, Germany, Italy, The Netherlands, Switzerland, Spain and the UK). The results obtained could be helpful for the decisions of institutional regulatory bodies since we find evidence of significant differences in the stock market valuation of accounting data not explained by the composition of the sample or macroeconomic factors, but mainly by the differences in reporting philosophies across Europe.

Date: 2002
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (25)

Downloads: (external link)
http://www.tandfonline.com/doi/abs/10.1080/09638180220125616 (text/html)
Access to full text is restricted to subscribers.

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:taf:euract:v:11:y:2002:i:3:p:573-599

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/REAR20

DOI: 10.1080/09638180220125616

Access Statistics for this article

European Accounting Review is currently edited by Laurence van Lent

More articles in European Accounting Review from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().