Valuation Role of Accounting Information in Profit and Loss Firms

Gee-Jung Kwon

Abstract


Purpose of the research: This study identifiesthe most important value-relevant factor across profit and loss companies listed on the Korean Securities Exchange over the period 2000 to 2015.Weaim to improve understanding of the role of accounting information provided by financial statements in firm value across companies.
Materials and methods: We use the residual income valuation model of Ohlson (1995).
Results: The impact of accounting information on enterprise value is significantly different across profit and loss companies. We believe that this phenomenon occurs because of the assumption of linear information dynamics in theresidual income model. These findings show that accounting information of profitable companies is likely to reflect on the future firm value; however, accounting information of loss companies tends to provide no such information to financial markets.


Keywords


Accounting information; Value relevance; Profit and loss; Korean securities exchange

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DOI: http://dx.doi.org/10.3968/9216

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