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Value Relevance of Summary Accounting Income Measures: Evidence from Major European Capital Markets


  • Jean-François Casta

    () (DRM FINANCE - DRM - Dauphine Recherches en Management - Université Paris-Dauphine - CNRS - Centre National de la Recherche Scientifique)

  • Olivier Ramond

    () (DRM FINANCE - DRM - Dauphine Recherches en Management - Université Paris-Dauphine - CNRS - Centre National de la Recherche Scientifique)

  • Stephen Lin

    () (Florida International University (FIU))


This study investigates the extent to which three key summary accounting income figures, namely operating income (OPI), net income (NI) and comprehensive income (CI), provide value-relevant information to investors in major EU capital markets. Using a large sample over the pre-IAS-compliance period (1992-2004), we find that all these three figures are statistically associated with share returns in any of the countries under analysis although disparities in the degree of 'usefulness' appear across samples. Our main results are then threefold. We first provide evidence that CI is less value-relevant than both NI and OPI in all the sample countries. Second, our results show that aggregate OCI is value-relevant and generally provides incremental price-relevant information beyond NI. This finding is rather different from the existing US literature that suggests OCI is usually not value-relevant especially when not separately disclosed in financial statements. Finally, considering early adoption firms, we find that increased transparency on reporting OCI as required by the UK FRS3 and US SFAS130 standards may have warranted a stronger statistical association between share returns and CI. This last finding therefore strongly supports the ideology underlying the IASB/FASB 'Performance Reporting' joint project, and provides evidence supporting Beaver's (1981) psychology-based financial reporting theory.

Suggested Citation

  • Jean-François Casta & Olivier Ramond & Stephen Lin, 2008. "Value Relevance of Summary Accounting Income Measures: Evidence from Major European Capital Markets," Post-Print halshs-00681212, HAL.
  • Handle: RePEc:hal:journl:halshs-00681212 Note: View the original document on HAL open archive server:

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    References listed on IDEAS

    1. Ajit Zacharias, 2002. "A Note on the Hicksian Concept of Income," Economics Working Paper Archive wp_342, Levy Economics Institute.
    2. Jean-François Casta & Bernard Colasse, 2001. "Juste valeur," Post-Print halshs-00669417, HAL.
    3. Olivier Ramond & Laurent Batsch & Jean-François Casta, 2007. "Résultat et performance financière en normes IFRS : Quel est le contenu informatif du comprehensive income ?," Comptabilité - Contrôle - Audit, Association francophone de comptabilité, vol. 13(3), pages 129-154.
    4. Ryan Lafond & Sugata Roychowdhury, 2008. "Managerial Ownership and Accounting Conservatism," Journal of Accounting Research, Wiley Blackwell, vol. 46(1), pages 101-135, March.
    5. Sloan, Richard G., 2001. "Financial accounting and corporate governance: a discussion," Journal of Accounting and Economics, Elsevier, vol. 32(1-3), pages 335-347, December.
    6. Dechun Wang, 2006. "Founding Family Ownership and Earnings Quality," Journal of Accounting Research, Wiley Blackwell, vol. 44(3), pages 619-656, June.
    7. Akinobu Shuto & Tomomi Takada, 2008. "Managerial Ownership and Accounting Conservatism: Empirical Evidence from Japan," Discussion Paper Series 227, Research Institute for Economics & Business Administration, Kobe University.
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