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Value Relevance of Book Value & Earnings Under the Local GAAP and IFRS: Evidence from Turkey

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  • Gulhan SUADIYE

    (Mustafa Kemal Universitesi, Iktisadi ve Idari Bilimler Fakultesi, Isletme Bolumu)

Abstract

This study examines empirically the impact of International Financial Reporting Standards (IFRS) on the value relevance of accounting information in Turkey. Turkish listed firms on the Istanbul Stock Exchange (ISE) are required to adopt IFRS in the preparation and presentation of their financial statements since 2005. Using the equity valuation model as suggested by Ohlson (1995), firstly, the value relevance of earnings and book values of equity produced under Turkish Local Standards (during 2000-2002) and under IFRS (during 2005-2009) is analyzed. And then, these two periods are compared to investigate whether the mandatory adoption of IFRS has an impact on value relevance of accounting information. The analysis results show that earnings and book value are, jointly and individually, positively and significantly related to stock price under the two different reporting regimes. Additionally, the results provide that book value of equity is more value relevant than earnings. When two different reporting standards are compared, it is found that the adoption of IFRS increased the value relevance of accounting information for Turkish listed firms. This study contributes to the existing literature on the value relevance of accounting information and to the debate over the mandatory adoption of IFRS.

Suggested Citation

  • Gulhan SUADIYE, 2012. "Value Relevance of Book Value & Earnings Under the Local GAAP and IFRS: Evidence from Turkey," Ege Academic Review, Ege University Faculty of Economics and Administrative Sciences, vol. 12(3), pages 301-310.
    • Handle: RePEc:ege:journl:v:12:y:2012:i:3:p:301-310
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    References listed on IDEAS

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    1. Lang, Mark & Smith Raedy, Jana & Wilson, Wendy, 2006. "Earnings management and cross listing: Are reconciled earnings comparable to US earnings?," Journal of Accounting and Economics, Elsevier, vol. 42(1-2), pages 255-283, October.
    2. Kirkulak, Berna & Balsari, Cagnur Kaytmaz, 2009. "Value Relevance of Inflation-adjusted Equity and Income," The International Journal of Accounting, Elsevier, vol. 44(4), pages 363-377, December.
    3. Mark Lang & Jana Smith Raedy & Michelle Higgins Yetman, 2003. "How Representative Are Firms That Are Cross‐Listed in the United States? An Analysis of Accounting Quality," Journal of Accounting Research, Wiley Blackwell, vol. 41(2), pages 363-386, May.
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    Cited by:

    1. Gatluak Gach Chuol Thony & Anthony Duku Peter, 2023. "The Impact of Adoption of International Financial Reporting Standard on Quality of Accounting Information in South Sudan: A Case Study of Kenya Commercial Bank and Cooperative Bank," International Journal of Science and Business, IJSAB International, vol. 19(1), pages 28-48.
    2. Carmen-Alexandra Baltariu Ph. D Student, 2015. "Value Relevance And The Adoption Of The Ias/ Ifrs Framework – A Literature Review," Revista Tinerilor Economisti (The Young Economists Journal), University of Craiova, Faculty of Economics and Business Administration, vol. 1(24), pages 13-20, APRIL.
    3. Meena Bhatia & Mwila J. Mulenga, 2019. "Value Relevance of Accounting Information: A Review of Empirical Evidence Across Continents," Jindal Journal of Business Research, , vol. 8(2), pages 179-193, December.
    4. Julio Pereira de Araujo & Marcos Roberto Gois de Oliveira Macedo, 2018. "Cointegration Analysis among the Variables of the Ohlson Model for Brazilian Companies," Applied Finance and Accounting, Redfame publishing, vol. 4(1), pages 122-145, February.
    5. Shah, Syed Zulfiqar Ali & Liang, Shuang & Akbar, Saeed, 2013. "International Financial Reporting Standards and the value relevance of R&D expenditures: Pre and post IFRS analysis," International Review of Financial Analysis, Elsevier, vol. 30(C), pages 158-169.

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    More about this item

    Keywords

    IFRS; value relevance; local GAAP; capital markets;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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