Research Paper
Commerce
E-ISSN No : 2454-9916 | Volume : 8 | Issue : 12 | Dec 2022
A STUDY ON VALUE RELEVANCE OF ACCOUNTING INFORMATION OF PUBLIC SECTOR BANKS LISTED IN NSE Dr. D. Rajagopal Assistant Professor (PT), Department of Commerce, Telangana Mahila Vishwavidhyalayam, Formerly Osmania University College for Women, Koti, Hyderabad. ABSTRACT The present study aimed in providing the empirical evidence related to value relevance of EPS, BVPS, and ROE on Market share price of public sector banks listed in National Stock Exchange. Study is based on secondary data. The two techniques were used to examine the value of relevance of accounting information in public sector banks stock. Earnings per Share and Return on Equity reported a positive and negative relationship and statistically significant with share price. The present study was conducted with a sample of 12 public sector banks listed in the National Stock Exchange during the period 2018 to 2022. KEYWORDS: Accounting information, National stock exchange, and value relevance.
INTRODUCTION: Value relevance studies aim to explain the relationship between accounting information and stock prices or stock returns from Mishari, A. (2011). Research on capital market-based value relevance. An accounting study described by Beisland (2009). Its originality is attributed to Beaver (1968) and Kugel and Braun (1968). In the context of India, previous studies have examined the relationship between accounting information Shares were obtained from Srivastava (1968), Zahir & Khanna (1982), Krishan (1984), Chawla & Khanna. Srinivasan (1987). Relevance is measured when there is a statistical relationship between accounting information Stock prices or stock returns from Franscie and Schipper (1999). Vishnani and Shah (2008) found that most studies accounting information and stock prices of listed companies motivated by accounting information Used by existing shareholders and listed companies as the most important means of communication between them. Accounting information defined as quantitative written information, in whole or in part quarterly or annual financial statement cover page as shown by Oyerinde (2009). Vijitha P. and Nimalathasan B. (2014) distinguish accounting and nonaccounting information the two categories of financial information that appear on financial statements. The main purpose of financial statements is to provide information about a company's performance financial situation and to help our users, especially Jermon and Meek investors, make better decisions (2001). Therefore, the study of the value relevance of accounting information is one of the most frequently discussed topics. It is still debated in financial accounting studies. Motivated by the need to provide empirical evidence whether accounting information is reported more to users of accounting information, especially investors relevant to stock valuation. Research on value relevance has been done by various researchers in India. The study fill the gap in literature by examine value relevance of accounting earnings per share, book value per share and other accounting information including return on equity on the share price of 12 public sector banks listed in National stock exchange (NSE) from 2018 to 2022. The remaining part of this paper structured as follows: Section 2 explain the review of literature on the value relevance of accounting information, section 3 discussed methodology used in the study, section 4 focuses on the data presentation and analysis, summary and conclusion and presented in section 5. REVIEW OF LITERATURE: The term value relevance was defined by the different researchers, discussion based on the previous studies related to the value of relevance of accounting information in Indian context and meaning of accounting information used in the study and their empirical results from different studies. Value relevance definition: Different researchers from different countries defined the word value relevance in their previous studies including Beisland (2009), Ohlson (1999), Barth et al (2000) and Amir et al (1993).
Prior study in 1993 by Amir et al used the term “value relevance” and defined as the relationship between accounting figures and market value of equity. The definition of value relevance given out by Amir et al (1993) closely related with definition given out by other researchers including Barth et al (2009) and Barth et al (1998). According to Beisland (2009) value relevance used in measuring statistical and significant relationship between accounting information and stock returns or stock price and defined value relevance as the ability of accounting information in capturing and summarizing share price. The same definition given out by Oyerinde (2009) in Nigeria. Oyerinde (2009) define value relevance as the ability and influence of accounting of accounting numbers in capturing equity share price of listed companies at Nigeria stock exchange. Most of the commonly used accounting information in examines value relevance in the previous studies including earnings per share and book value per share commonly used in measuring its value relevant in equity valuation as stated by Oyerinde (2009). Value relevance research aimed in finding out whether accounting information published in the financial statements provide useful and valuable information for the users of accounting information especial investors as stated by Negakis (2005) as cited from Mishary A.(2011). While Barth el (2001) argue that research on the value relevance very important to the users such as investors, accounting standard setters and other users because aimed in extending knowledge regarding value and useful of accounting information as reflecting equity value as cited from Mishary,A.(2011). From the review of literature related to the value relevance definition, this study defined the term value relevance the same way as it was stated by previous researcher including Beisland (2009) and Oyerinde (2006). Previous study on value relevance of accounting information in India. Previous study on the value relevance of accounting information of book value, earnings and dividend on the share price of public and private sector listed in Indian stock market has been done by Sharma, M. (2014).Twenty companies each selected from public and private sector used as a sample in the study and results reported dividend and book value to be more relevant in private sector but in public sector only dividend found to be more relevant while book value and earnings reported to decline its value relevance. The results found to be inconsistent compared to another comparative study done in Nigeria by Oshodin and Chijoke (2014) used a sample of 10 companies each from petroleum and banking sector listed in Nigeria stock exchange. They reported earnings per share to be more relevant on share price of petroleum and banking sectors. On the other hand Charumathi and Suraj (July – September) examine value relevance of earnings and book value on the share price of 14 banks (6 banks from private banks sector and 8 banks from public banks sector) listed in Bombay stock exchange from 2001 to 2010.They employed regression analysis with theoretical framework of Ohlson valuation model (1995) and reported accounting information of book value and earnings per share to have positive and significant relationship with share price of 14 banks stock. The result found to be consistent compared to the recent study done by Khanna, M (2014) in Bombay stock exchange.
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