Academic journal article Academy of Accounting and Financial Studies Journal

Comparative Value Relevance of Accounting Information in the Ifrs Period between Manufacturing Company and Financial Services Go Public in Indonesia Stock Exchange

Academic journal article Academy of Accounting and Financial Studies Journal

Comparative Value Relevance of Accounting Information in the Ifrs Period between Manufacturing Company and Financial Services Go Public in Indonesia Stock Exchange

Article excerpt

INTRODUCTION

An information is available in the capital market can be considered meaningful or valuable if the existence of such information causes investors to transactions reflected in the stock price changes (Rahmawati, 2005). Accounting information has value relevance of the accounting information can be used as a basis for predicting the company's market value (Barth, 2001; Scott, 2009: 196). Thus, how much usefulness of information known by studying the effect of the stock price at the time the information is received by investors? The change in the stock price will lead to a return that will be accepted by investors.

The study, initiated studies on earnings relationship with stock returns made by Ball & Brown (1968). Earnings variable has relevant value because it has an influence on the share price reflects the value of the company Ball & Brown (1968). Value relevance of earnings and book value information is not decreased over the last 40 years but shows a slight upward movement, as well as a shift in the value relevance of earnings information to the value of the book (Collins, 1997). Cross-sectional relationship model of return, ie the reporting relationship of accounting profit and operating cash flow with stock returns has decreased over the 20-year observation period. On the use of pricing models, namely the relationship between accounting earnings and book value with the share price also declined over the 20-year observation period. This is due to the limitations of financial statements that do not adequately describe the changes of the company's operations due to technological innovations and competition (Brief & Zarowin, 1995).

In its development, IFRS many adopting fair value using realizable value and present value. Fair value is the measurement basis is considered more independent and impartial. Trends in the use of fair value as the measurement and assessment base is expected to increase from year to year (Purba, 2010). Impact of IFRS implementation for companies varies widely depending on the type of industry, type of transaction, the elements of financial statements that are owned, and also accounting policy choice. Such changes can be related to accounting procedures. Banking company, including the impact of the changes that have quite a lot. The changes are not only done at the corporate level, but there should also be changes in the regulations of Bank Indonesia, for example, about the provision for loans disbursed (Martani, 2011). Adoption of IFRS impact on aspects of measurement of financial reporting items, such as net income and equity (Jermakowijcz, 2004), as well as adoption of IFRS improve the quality of financial statements (Daske and Gunther, 2006). Implementation of IFRS standards on the financial statements of this item may reduce the level of earnings management and adoption of IFRS has positive influence toward the shareholder equity, net income, and liquidity (Tsalavautas & Evans, 2010).

This study aims to examine the value relevance of accounting information between groups the manufacturing industry and the Financial Services in period from 2008 through 2014. In order to achieve the objectives of this research will comparative analyze value relevance of the company's manufacturing and financial services in the period IFRS convergence (Hendriksen & Van Breda, 1992).

LITERATURE REVIEW AND DEVELOPMENT OF HYPOTHESIS

Definition Relevance Value

A number of accounting is defined as the value relevance if the figure is associated with equity market values (Ohlson, 1995; Barth, 2001; Holthausen & Watts, 2001). Accounting information is said to have value relevance if the accounting information can be used to predict the company's market value (market stock price or stock returns) (Barth, 2001). Easton (1999) and Beaver (2002) states that the value relevance research aims to examine the association between the dependent variable based on the price of securities by a number of fundamental accounting variables. …

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