Evaluating the value relevance of book value,accounting earning and cash flow with stock prices

Subject Areas : Management Accounting

Khosro FaghaniMakrani ¹ (استاد‌یاردانشگاه آزاد اسلامی،واحد سمنان، گروه حسابداری، سمنان)

Received: 2014-08-19 Accepted : 2014-10-23 Published : 2015-04-09

Keywords: Value Relevance, stock prices, Book value, Earning, Cash flows,

Abstract :

Considering the role of the book value, accounting earning and cash flows, the research examined the relevance of these variables separately and in combination with the stock price of listed companies in Tehran Stock Exchange concerning the classification of companies into profitable and unprofitable companies and managed earning companies and unmanaged earning companies as a basis for decision making and forecasting beneficiaries. By applying the data from 129 listed firms in Tehran Stock Exchange in the period from 2007 to 2012, the present research has been conducted on a descriptive-correlation based approach and the linear and multivariate regression technique used to test the hypotheses. The results showed that the book value has more relevance to the stock price than accounting earnings and cash flows which decreases over time. Also, the findings suggest that the profitability and unprofitability of the companies have no impact on the relevance of book value, accounting earnings and cash flows and the combined value relevance of book value and earnings and the combined value relevance of book value and cash flows with stock price over time. In unprofitable and unmanaged earning companies, the combined value relevance of book value, accounting earning witnesses a decrease whereas the combined value relevance of book value and cash flow undergoes an increase.