Value relevance of earnings, book value and dividends in an emerging capital market: Kuwait evidence
AbstractThis study examines the value relevance of book value, earnings and dividends for a sample of all non-financial firms listed on the Kuwait Stock Exchange (KSE) over the period 2003–2009. After controlling for the impact of the global financial crisis, empirical results provide evidence on the value relevance of book value and earnings in the KSE. The results indicate that dividends are not a value-relevant in the presence of earnings in the valuation model. However, when dividends are used as a substitute for earnings they become value-relevant. The explanatory power of the model including both book value and earnings is almost indistinguishable from that of book value and dividends. Furthermore, splitting earnings into dividends declared (or paid) and earnings retained results in each of the two variables becoming value-relevant. The average dividend pay-out ratio tends to increase over time, indicating that dividend policies do matter in the KSE and that dividends in Kuwait are used to boost investors' confidence and support share price, noticeably during the global financial crisis period.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal Global Finance Journal.
Volume (Year): 23 (2012)
Issue (Month): 3 ()
Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/620162
Gulf cooperation council (GCC); Market-based accounting research (MBAR); Value relevance;
Find related papers by JEL classification:
- M40 - Business Administration and Business Economics; Marketing; Accounting - - Accounting - - - General
- M41 - Business Administration and Business Economics; Marketing; Accounting - - Accounting - - - Accounting
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Dechow, Patricia M., 1994. "Accounting earnings and cash flows as measures of firm performance : The role of accounting accruals," Journal of Accounting and Economics, Elsevier, Elsevier, vol. 18(1), pages 3-42, July.
- Andrew W. Stark, 1997. "Linear Information Dynamics, Dividend Irrelevance, Corporate Valuation and the Clean Surplus Relationship," Accounting and Business Research, Taylor & Francis Journals, Taylor & Francis Journals, vol. 27(3), pages 219-228, February.
- Peter D. Easton & Gregory A. Sommers, 2003. "Scale and the Scale Effect in Market-based Accounting Research," Journal of Business Finance & Accounting, Wiley Blackwell, Wiley Blackwell, vol. 30(1-2), pages 25-56.
- Katerina Hellstrom, 2006. "The Value Relevance of Financial Accounting Information in a Transition Economy: The Case of the Czech Republic," European Accounting Review, Taylor & Francis Journals, Taylor & Francis Journals, vol. 15(3), pages 325-349.
- John R. M. Hand & Wayne R. Landsman, 2005. "The Pricing of Dividends in Equity Valuation," Journal of Business Finance & Accounting, Wiley Blackwell, Wiley Blackwell, vol. 32(3-4), pages 435-469.
- Merton H. Miller & Franco Modigliani, 1961. "Dividend Policy, Growth, and the Valuation of Shares," The Journal of Business, University of Chicago Press, University of Chicago Press, vol. 34, pages 411.
- Mary E. Barth & Greg Clinch, 2009. "Scale Effects in Capital Markets-Based Accounting Research," Journal of Business Finance & Accounting, Wiley Blackwell, Wiley Blackwell, vol. 36(3-4), pages 253-288.
- Jenni L. Bettman, 2007. "Australian Evidence Regarding the Value-Relevance of Technical Information," Australian Journal of Management, Australian School of Business, Australian School of Business, vol. 32(1), pages 57-71, June.
- Saeed Akbar & Andrew W. Stark, 2003. "Deflators, Net Shareholder Cash Flows, Dividends, Capital Contributions and Estimated Models of Corporate Valuation," Journal of Business Finance & Accounting, Wiley Blackwell, Wiley Blackwell, vol. 30(9-10), pages 1211-1233.
- White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, Econometric Society, vol. 48(4), pages 817-38, May.
- Kee-Hong Bae & Seok Woo Jeong, 2007. "The Value-relevance of Earnings and Book Value, Ownership Structure, and Business Group Affiliation: Evidence From Korean Business Groups," Journal of Business Finance & Accounting, Wiley Blackwell, Wiley Blackwell, vol. 34(5-6), pages 740-766.
- Kothari, S. P. & Zimmerman, Jerold L., 1995. "Price and return models," Journal of Accounting and Economics, Elsevier, Elsevier, vol. 20(2), pages 155-192, September.
- Aiman A. Ragab & Mohammad M. Omran, 2006. "Accounting information, value relevance, and investors’ behavior in the Egyptian equity market," Review of Accounting and Finance, Emerald Group Publishing, Emerald Group Publishing, vol. 5(3), pages 279-297, August.
- Saeed Akbar & Andrew W. Stark, 2003. "Discussion of Scale and the Scale Effect in Market-based Accounting Research," Journal of Business Finance & Accounting, Wiley Blackwell, Wiley Blackwell, vol. 30(1-2), pages 57-72.
- Berger, Philip G. & Ofek, Eli & Swary, Itzhak, 1996. "Investor valuation of the abandonment option," Journal of Financial Economics, Elsevier, Elsevier, vol. 42(2), pages 257-287, October.
- Core, John E. & Guay, Wayne R. & Buskirk, Andrew Van, 2003. "Market valuations in the New Economy: an investigation of what has changed," Journal of Accounting and Economics, Elsevier, Elsevier, vol. 34(1-3), pages 43-67, January.
- Cramer, J. S., 1987. "Mean and variance of R2 in small and moderate samples," Journal of Econometrics, Elsevier, Elsevier, vol. 35(2-3), pages 253-266, July.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If references are entirely missing, you can add them using this form.