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The value relevance of earnings in a transition economy: The case of Romania

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  • Filip, Andrei
  • Raffournier, Bernard

Abstract

We investigate the value relevance of earnings on the Bucharest Stock Exchange. We find that the association between accounting earnings and stock returns is comparable to the levels reported by studies conducted on more mature markets, and that it is higher for securities issued by small companies. Excluding losses from the analysis increases the value relevance of earnings, which confirms the transitory nature of negative earnings, already documented by prior studies. We also find that the regression coefficient of earnings changes is negative and we provide evidence consistent with the hypothesis that it is a consequence of the relative inefficiency of the market. Finally, the "prices lead earnings" hypothesis formulated for more mature markets is not supported by our results.

Suggested Citation

  • Filip, Andrei & Raffournier, Bernard, 2010. "The value relevance of earnings in a transition economy: The case of Romania," The International Journal of Accounting, Elsevier, vol. 45(1), pages 77-103, March.
  • Handle: RePEc:eee:accoun:v:45:y:2010:i:1:p:77-103
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    References listed on IDEAS

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    1. Brown, Stephen & Lo, Kin & Lys, Thomas, 1999. "Use of R2 in accounting research: measuring changes in value relevance over the last four decades," Journal of Accounting and Economics, Elsevier, vol. 28(2), pages 83-115, December.
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    Cited by:

    1. Qu, Xiaohui & Zhang, Guohua, 2015. "Value-relevance of Earnings and Book Value Over the Institutional Transition in China: The Suitability of Fair Value Accounting in This Emerging Market," The International Journal of Accounting, Elsevier, vol. 50(2), pages 195-223.
    2. Elisabeta Jaba & Ioan-Bogdan Robu & Costel Istrate & Christiana Brigitte Balan & Mihai Roman, 2016. "Statistical Assessment of the Value Relevance of Financial Information Reported by Romanian Listed Companies," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 27-42, June.
    3. Dobija, Dorota & Klimczak, Karol Marek, 2010. "Development of accounting in Poland: Market efficiency and the value relevance of reported earnings," The International Journal of Accounting, Elsevier, vol. 45(3), pages 356-374, September.
    4. Mihaela Iona?cu & Ion Iona?cu & Marian Sacarin & Mihaela Minu, 2017. "Exploring the Impact of ISO 9001, ISO 14001 and OHSAS 18001 Certification on Financial Performance: The Case of Companies listed on the Bucharest Stock Exchange," The AMFITEATRU ECONOMIC journal, Academy of Economic Studies - Bucharest, Romania, vol. 19(44), pages 166-166, February.
    5. repec:aud:audfin:v:16:y:2018:i:149:p:101 is not listed on IDEAS
    6. Mihaela Alina ROBU, 2014. "The Level Of Knowledge In The Value Relevance Literature," CES Working Papers, Centre for European Studies, Alexandru Ioan Cuza University, vol. 6(4), pages 122-135, December.
    7. Jamal Barzegari Khanagha, 2011. "Value Relevance of Accounting Information in the United Arab Emirates," International Journal of Economics and Financial Issues, Econjournals, vol. 1(2), pages 33-45, June.

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