ISSN: 2225-8329
Open access
The purpose of this study is to examine the impact of economic factors, namely, foreign ownership and trading volume on the value relevance of accounting information. Value-relevance is measured by the adjusted R2 derived from a regression of stock price on EPS, BVPS, and CFPS using the price model. The study sample included 71 manufacturing companies listed with Dhaka Stock Exchange (DSE) in Bangladesh within the period 2000-2017. The results of this study showed that earnings (EPS), book value (BVPS), and cash flow (CFPS) are value relevant to the share price. This paper found that the value relevance of EPS and BVPS is greater for companies having foreign ownership and the value relevance of BVPS and CFPS is greater for companies’ larger trading volume. The findings suggest that market participants might be able to extract the firm value via these economic factors. This paper presents the ability of valuation theory/model to interact with other theories by including the impact of economic factors on the accounting information value relevance. This study may introduce proof that can serve the educational institutions in their courses and provide a guideline to investors, managers and financial analysts to better summarize the firm value. This research likewise makes windows for future studies toward this path for different sectors.
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To cite this article: Uddin, H. (2020). Economic Factor and Value Relevance of Accounting Information in Bangladesh, International Journal of Academic Research in Accounting, Finance and Management Sciences 10 (2):36-48.
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