This study investigates the ability of accounting numbers to summarize information which affects share prices in Italy before and after the adoption of IFRS. The research focus is on Value Relevance, which expresses the ability of accounting information to reflect changes in stock prices. An accounting number is "value relevant" if it is useful for investment decisions of financial statement users. Value relevance is hereby operationalized by a regression model measuring the strength of the linear relationship between share prices and book value per share plus earnings per share. The analysis involves a sample of 160 Italian firms whose shares were listed in the Milan Stock Exchange from 2002 to 2007. It is carried out by contrasting data related to the pre-adoption period (2002-2004) with that concerning the post-adoption one (2005-2007) in order to asses, through suitable statistical tests, whether possible changes in Value Relevance between the two periods are systematic. The investigation is mainly motivated by the different goals of financial reporting based on Italian accounting standards compared to IFRS-based financial reporting. Besides the analysis of the whole set of sampling firms, a sectoral analysis is also performed to check whether possible changes in Value Relevance differ with respect to the industry sector of each firm. Empirical evidence documents that Value Relevance consistently increases following the IFRS adoption, and that such an increase is particularly marked for firms operating in the Finance and Services sectors.
La Value Relevance dell’informativa di bilancio: dai principi contabili italiani agli standard contabili internazionali
PAVAN, ALDO;PAGLIETTI, PAOLA
2011-01-01
Abstract
This study investigates the ability of accounting numbers to summarize information which affects share prices in Italy before and after the adoption of IFRS. The research focus is on Value Relevance, which expresses the ability of accounting information to reflect changes in stock prices. An accounting number is "value relevant" if it is useful for investment decisions of financial statement users. Value relevance is hereby operationalized by a regression model measuring the strength of the linear relationship between share prices and book value per share plus earnings per share. The analysis involves a sample of 160 Italian firms whose shares were listed in the Milan Stock Exchange from 2002 to 2007. It is carried out by contrasting data related to the pre-adoption period (2002-2004) with that concerning the post-adoption one (2005-2007) in order to asses, through suitable statistical tests, whether possible changes in Value Relevance between the two periods are systematic. The investigation is mainly motivated by the different goals of financial reporting based on Italian accounting standards compared to IFRS-based financial reporting. Besides the analysis of the whole set of sampling firms, a sectoral analysis is also performed to check whether possible changes in Value Relevance differ with respect to the industry sector of each firm. Empirical evidence documents that Value Relevance consistently increases following the IFRS adoption, and that such an increase is particularly marked for firms operating in the Finance and Services sectors.
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