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Value relevance of earnings, book value and dividends in an emerging capital market: Kuwait evidence

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  • Al-Hares, Osama M.
  • AbuGhazaleh, Naser M.
  • Haddad, Ayman E.

Abstract

This 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.

Suggested Citation

  • Al-Hares, Osama M. & AbuGhazaleh, Naser M. & Haddad, Ayman E., 2012. "Value relevance of earnings, book value and dividends in an emerging capital market: Kuwait evidence," Global Finance Journal, Elsevier, vol. 23(3), pages 221-234.
    • Handle: RePEc:eee:glofin:v:23:y:2012:i:3:p:221-234
    DOI: 10.1016/j.gfj.2012.10.006
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    3. Harish Kumar Singla & Anand Prakash, 2021. "Financial determinants of value based performance of construction firms in India," International Journal of Productivity and Performance Management, Emerald Group Publishing Limited, vol. 72(4), pages 1025-1050, October.
    4. Ali Naef Mohammad, 2016. "Valuation Tools for Determining the Value of Assets: A Literature Review," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 6(4), pages 63-72, October.
    5. Elnahass, Marwa & Salama, Aly & Trinh, Vu Quang, 2022. "Firm valuations and board compensation: Evidence from alternative banking models," Global Finance Journal, Elsevier, vol. 51(C).
    6. Michael Siemon, 2018. "Price Synchronicity, Inter-Firm Networks, and Business Groups in the Middle East and North Africa," Working Papers 1267, Economic Research Forum, revised 10 Dec 2018.
    7. IOAN-BOGDAN ROBU & Costel ISTRATE & Mihai CARP & CRISTIAN POPESCU & MIHAELA-ALINA ROBU, 2016. "The Value Relevance Of Financial Information Under The Influence Of Country Risks. The Case Of The Indian Listed Companies," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 18, pages 77-93, December.
    8. Maigoshi, Zaharaddeen Salisu & Latif, Rohaida Abdul & Kamardin, Hasnah, 2018. "Change in value-relevance of disclosed RPT across accounting regimes: Evidence from Malaysia," Research in International Business and Finance, Elsevier, vol. 44(C), pages 422-433.
    9. Yuni Pristiwati Noer Widianingsih & Doddy Setiawan, 2023. "The tenure of directors and value relevance of accounting information," SN Business & Economics, Springer, vol. 3(6), pages 1-18, June.
    10. Kehinde Adesina & Uwalomwa Uwuigbe & Olubukola Ranti Uwuigbe & Osariemen Asiriuwa & Sylvester Oriabe, 2017. "Dividend Policy and Share Price Valuation in Nigerian Banks," EuroEconomica, Danubius University of Galati, issue 1(36), pages 185-195, May.
    11. Dang Ngoc Hung & Hoang Thi Viet Ha & Dang Thai Binh, 2018. "Impact of Accounting Information on Financial Statements to the Stock Price of the Energy Enterprises Listed on Vietnam s Stock Market," International Journal of Energy Economics and Policy, Econjournals, vol. 8(2), pages 1-6.

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    More about this item

    Keywords

    Gulf cooperation council (GCC); Market-based accounting research (MBAR); Value relevance;
    All these keywords.

    JEL classification:

    • M40 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - General
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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