Impact of Accounting and Macro-Economic indicators on Market Value of firms under different legal orientation
Abstract/Description
This paper investigates the impact of accounting numbers and macro-economic indicators on the market value of firms of sixteen countries using International Financial Reporting Standards classified under four different legal orientations. We analyze annual data of share prices along with accounting variables and macro-economic indicators for the period of 2006-2016. Our findings suggest that accounting and macro-economic indicators explain varying degree of variance in share prices under different legal set ups. Among the accounting variables, earnings per share have more explanatory power in common law countries, whereas book value per share carries more weight in the code law countries. Macro-economic variables enhance the explanatory power of accounting variables in general. The results indicate that demand for earning per share is greater in common law countries due to the preference to the shareholders’ rights in the common law framework and, additionally, elasticity in book value of equity per share is more relevant in French, German and Scandinavian law countries due to strong hold of the banking institutions in these countries. The open and closed nature of the economic structure of the common and code law countries make accounting variables the most relevant piece of information in contributing towards the markets value of firms under different legal frameworks. However, no generalization can be drawn regarding the macro-economic and market structure proxies under different legal structures
Keywords
Value Relevance, Accounting Variables, Macro-Economic Indicators, Legal Orientation, Panel Data
Track
Accounting & Law
Session Number/Theme
1D: Accounting & Law
Session Chair
Dr. Danish Godil ; Dr. Asif Jaffar
Start Date/Time
30-5-2024 1:50 PM
End Date/Time
30-5-2024 3:20 PM
Location
MCC – 11 AMAN CED Building
Recommended Citation
Irshad, S. (2024). Impact of Accounting and Macro-Economic indicators on Market Value of firms under different legal orientation. 3rd IBA SBS International Conference 2024. Retrieved from https://ir.iba.edu.pk/sbsic/2024/program/57
COinS
Impact of Accounting and Macro-Economic indicators on Market Value of firms under different legal orientation
MCC – 11 AMAN CED Building
This paper investigates the impact of accounting numbers and macro-economic indicators on the market value of firms of sixteen countries using International Financial Reporting Standards classified under four different legal orientations. We analyze annual data of share prices along with accounting variables and macro-economic indicators for the period of 2006-2016. Our findings suggest that accounting and macro-economic indicators explain varying degree of variance in share prices under different legal set ups. Among the accounting variables, earnings per share have more explanatory power in common law countries, whereas book value per share carries more weight in the code law countries. Macro-economic variables enhance the explanatory power of accounting variables in general. The results indicate that demand for earning per share is greater in common law countries due to the preference to the shareholders’ rights in the common law framework and, additionally, elasticity in book value of equity per share is more relevant in French, German and Scandinavian law countries due to strong hold of the banking institutions in these countries. The open and closed nature of the economic structure of the common and code law countries make accounting variables the most relevant piece of information in contributing towards the markets value of firms under different legal frameworks. However, no generalization can be drawn regarding the macro-economic and market structure proxies under different legal structures
Comments
I am also working on a draft where i am investigating the impact of AI on accounting quality. The draft is in process. Hopefully will be completed by the time. However this draft is complete.