A Study on Value Relevance of Accounting Information in Indian Stock Market: the Case of Auto Sector

Abstract

In the recent times, there have been various studies criticizing the value relevance of accounting information as the economies are transforming from industrial economies to knowledge based and service economies. There is tremendous growth of intangibles, inclination towards high technology and hence more focus on non financial information. This has lead to a re-examining of the value relevance of financial information provided in the financial statements. This belief has become stronger due to the studies which have talked about the losing relevance of such financial statements or accounting or financial information. In this study Ohlson's (1995) equity valuation is explicitly applied to examine the value relevance of financial information. Variables selected for the study represent the financial statements and an attempt is made to find the combined effect of these variables on the PB ratio and market price. The study has used the appropriate statistical tools such as regression, correlation analysis to analyse the data. The expected results are that financial information is relevant and has an impact on the dependent variable. The study concludes that there is a impact of accounting/ financial information on market price of share and this impact is more pronounced in comparison to the impact on PB Ratio. Net income and the PE Ratio are the most significant variables of the study.