Discussion Papers, Department of Finance and Management Science, Norwegian School of Economics (NHH)
No 2005/23:
The Value Relevance of Financial Reporting on the Oslo Stock Exchange over the Period 1964-2003
Øystein Gjerde ()
, Kjell Henry Knivsflå ()
and Frode Sættem ()
Abstract: This article focuses on the value relevance of financial
statements in Norway over the 40-year period from 1964 to 2003. Since
Norwegian generally accepted accounting principles are based on an
earnings-oriented conceptual view rather than a balance-oriented conceptual
framework, like the ones adopted by the IASB and the FASB, this study
provides interesting empirical evidence on the value relevance of
earnings-oriented conceptual frameworks. Our main finding is that the value
relevance of financial reporting for investors trading on the Oslo Stock
Exchange has increased significantly over the past four decades. This
result is obtained by evaluating the adjusted R2-metric from a stock market
return regression over time using deflated earnings and deflated change in
earnings as explanatory variables, and controlling for changes in
underlying economic variables over the period. A significant time trend is
consistent with the view that Norwegian accounting regulators and standard
setters have been successful in achieving more value relevant financial
statements over time. Norway is an example where employing an
earnings-oriented conceptual framework has improved the value relevance of
accounting information.
Keywords: Capital Markets; Financial Reporting; Equity Valuation; Value Relevance; (follow links to similar papers)
JEL-Codes: G10; G38; M41; (follow links to similar papers)
32 pages, December 23, 2005
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