Accounting Information and Value Relevance Nexus: Evidence from Pakistan

Abstract

This study aims at studying the value relevance of accounting information produced by large companies in Pakistan as there is a dearth of research in linking the returns on securities with accounting information produced by the companies in the Pakistan economy. For this purpose, the data was collected from 170 companies in the non-financial sector for 11 years (2006-2016). Panel data settings were used to regress the accounting information i.e., Earnings with Returns which are calculated using the Returns model. Empirical results prove that Earning figures are consistently value relevant throughout the period but the increase in value relevance of earnings is not significant. It is also shown that investors in Pakistan are giving more importance to Changes in Earnings over a sample period than to Earnings. This study is likely to highlight the importance of accounting information to investors in making their investment decisions.