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Using Statistical Analysis to Investigate the Relevance of Accounting Information in Emerging Financial Markets: An Empirical Study

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  • Walid Belassi
  • Sherif S. Elbarrad

Abstract

Despite extensive literature and numerous published work on the area of value relevance of accounting information, a major part of the studies have been conducted on large and developed capital markets. While there are a number of published articles in the area of value relevance of accounting information in developing markets, there is still a need to investigate more developing markets to see if there are similarities or different attributes of each market that could shed more light on the importance and usefulness of accounting relevance in developing markets. To study further the gap of accounting relevance in developing markets, this study investigates the relationship between the accounting information – represented in the financial ratios, F-Score, M-Score, in addition to market-related measures – and stock price represented in the ratio of Price to Book Value (PBV) per share and Price-Earnings (PE) Ratio. In order to shed light on the significant variables that affect the stock price in emerging markets, this study examines the cement sector in Saudi Arabia. The results of the study indicate that F-score, inventory turnover, current ratio, debt-to-equity ratio, return on assets, and average trading are significant determinants of PBV. Combined, they explain 75.1% of the variations in PBV. The study also shows that F-score and inventory turnover are significant determinants of PE. Combined, they explain 23.1% of the variations in PE.

Suggested Citation

  • Walid Belassi & Sherif S. Elbarrad, 2020. "Using Statistical Analysis to Investigate the Relevance of Accounting Information in Emerging Financial Markets: An Empirical Study," Asian Social Science, Canadian Center of Science and Education, vol. 16(6), pages 1-1, June.
    • Handle: RePEc:ibn:assjnl:v:16:y:2020:i:6:p:1
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    References listed on IDEAS

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    1. Christian Dunis & Declan Reilly, 2004. "Alternative valuation techniques for predicting UK stock returns," Journal of Asset Management, Palgrave Macmillan, vol. 5(4), pages 230-250, December.
    2. Chan, Louis K C & Hamao, Yasushi & Lakonishok, Josef, 1991. "Fundamentals and Stock Returns in Japan," Journal of Finance, American Finance Association, vol. 46(5), pages 1739-1764, December.
    3. repec:eme:mfppss:v:35:y:2009:i:2:p:156-179 is not listed on IDEAS
    4. Ivica Pervan & Marijana Bartulović, 2014. "Value relevance of accounting information: evidence from South Eastern European countries," Economic Research-Ekonomska Istraživanja, Taylor & Francis Journals, vol. 27(1), pages 181-190, January.
    5. Jamie Alcock & Philip Gray, 2005. "Forecasting Stock Returns Using Model‐Selection Criteria," The Economic Record, The Economic Society of Australia, vol. 81(253), pages 135-151, June.
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    Cited by:

    1. Abdulrahman Alomair & Alan Farley & Helen Hong Yang, 2022. "The impact of IFRS adoption on the value relevance of accounting information in Saudi Arabia," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(2), pages 2839-2878, June.

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    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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