Is accounting information value-relevant in the emerging Egyptian stock market

Ashraf Elbakry, Ahmed El-Masry, John Pointon

Research output: Contribution to journalArticle

Abstract

The relationship between accounting information and capital markets has been the subject of numerous studies, especially in the US. The purpose of this study is to examine the corresponding evidence in Egypt. The study examines empirically, using a regression model based on a modified Ohlson equityvaluation framework, whether domestic investors in the Egyptian stock market perceive accounting information based on Egyptian Accounting Standards (EAS) to be value-relevant. The study is motivated by the market-based value-relevance literature in the US and by the continuous developments of accounting and stock markets in Egypt. Five-year pooled data were gathered to test two models. By employing the trading volume model, we found a significant impact of share book value, leverage, return on investment, size (measured by the log of market capitalisation) and price to earnings ratio on trading volume. While a positive association between trading volume and leverage and size is found, trading volume is significantly negatively associated with share book value, return on investment and price to earnings ratio. By employing the market share price model, we found market share price of the sampled firms to be mainly determined by the firm’s size (measured by the log of total investments), leverage, and earnings per share.
Original languageEnglish
Pages (from-to)66-76
Number of pages11
JournalInternational Journal of Business Research
Volume6
Issue number3
Publication statusPublished - 2006
Externally publishedYes

Keywords

  • value relevance
  • accounting standards
  • share price
  • trading volume
  • emerging markets
  • Egypt

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