82nd International Atlantic Economic Conference

October 13 - 16, 2016 | Washington, USA

New results on value relevance research in Poland

Saturday, October 15, 2016: 9:20 AM
Marek GruszczyƄski, Ph.D. , Institute of Econometrics, Warsaw School of Economics, Warszawa, Poland
Objectives

The paper's objective is to present a survey of recent attempts in modelling value relevance of financial reports for the companies in Poland. Value relevance models relate financial statement data disclosed by companies to their market valuation. Commonly, the value relevance models concentrate on the association/ correlation between accounting information and stock returns/ prices.

Data/ Methods

This is a survey-type paper. The value relevance models are typically classified within the scope of financial microeconometrics. A variety of modelling approaches stem from classic models of Ohlson (1995) where share price is linearly related to earnings per share and book-value per share and the approach by Easton and Harris (1991), where stock return is related to the earnings level and the earnings change over the previous period. Polish market researchers utilize novel methodological approaches, like the use of principal component analysis applied to all items appearing in financial statements (for extracting explanatory variables) or replacing typical explained variables in value relevance models by less frequently exploited E/P ratio.

Results/ Expected results

The aim of the presentation is to indicate major impediments in constructing and using value relevance models. This is done in the context of the data for companies listed on the Warsaw Stock Exchange. The outcomes of most attempts are similar. The association between the market valuation of companies and the information from their accounting/ financial reports seems to be valid and significant. The strength of this association shown in the research depends on the methodological approach and data selection.

Keywords

value relevance of accounting statements, financial microeconometrics, comparative valuation