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  • On the intertemporal value relevance of conventional financial accounting in Australia

    Author(s)
    Brimble, Mark
    Hodgson, Allan
    Griffith University Author(s)
    Brimble, Mark A.
    Year published
    2007
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    Abstract
    This paper examines whether the relevance of conventional (earnings focused) accounting information for valuation has declined in Australia over a recent period of 28 years. Motivation is provided by the anecdotal concerns of financial analysts, accounting regulators, and a cluster of US centric academic research papers that conclude that the relevance of financial accounting (and earnings in particular) has declined over time. After controlling for nonlinearities and stock price inefficiencies, we find that the value relevance of core accounting earnings has not declined. A possible exception is found for small stocks. We ...
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    This paper examines whether the relevance of conventional (earnings focused) accounting information for valuation has declined in Australia over a recent period of 28 years. Motivation is provided by the anecdotal concerns of financial analysts, accounting regulators, and a cluster of US centric academic research papers that conclude that the relevance of financial accounting (and earnings in particular) has declined over time. After controlling for nonlinearities and stock price inefficiencies, we find that the value relevance of core accounting earnings has not declined. A possible exception is found for small stocks. We also observe that net book values are relatively less important in Australia when compared to the USA. Our results are informative for investors who require feedback on valuation issues and the International Accounting Standards Board regulators in any further moves towards a balance sheet focus.
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    Journal Title
    Accounting and Finance
    Volume
    47
    Issue
    4
    DOI
    https://doi.org/10.1111/j.1467-629X.2007.00241.x
    Subject
    Applied economics
    Accounting, auditing and accountability
    Banking, finance and investment
    Publication URI
    http://hdl.handle.net/10072/16994
    Collection
    • Journal articles

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