Effect of Accounting Information on Share Prices

6263 Words Dec 3rd, 2012 26 Pages
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International Journal of Economics and Finance

Vol. 4, No. 2; February 2012

The Impact of Accounting Information on Stock Prices: Evidence from the Athens Stock Exchange
Michalis Glezakos University of Piraeus, Department of Insurance and Statistics 80 Karaoli & Dimitriou, 185 34, Piraeus, Greece E-mail: migl@unipi.gr John Mylonakis (Corresponding author) 10, Nikiforou str., Glyfada, 166 75, Athens, Greece E-mail: imylonakis@vodafone.net.gr Charalampos Kafouros M.A. University of Piraeus, Greece E-mail: bkafouros@gmail.com Received: November 23, 2011 doi:10.5539/ijef.v4n2p56 Abstract Past empirical research indicates that, in an increasing number of countries, certain accounting parameters affect the course
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Canibao, Garcia-Ayuso and Rueda (1999) examined accounting data taken from Spanish companies, showing that the joint explanatory power of earnings and book values has not declined in the latest decades. However, their results demonstrated a slight decline in the marginal explanatory power of book values in relation to earnings. The usefulness of accounting data in business evaluation was, also, evidenced by Ou and Penman (1989), Ohlson (1989, 1995) and Penman (1996). They explained a company 's internal value by using accounting parameters and concluded that they can be used to identify stocks that have not been properly evaluated. Τhey, also, expressed the view that the book value and earnings form the primary accounting variables which are used to interpret stock prices. Their findings are, also, supported by the empirical studies conducted by Lev (1996) and Francis and Schipper (1996), who examined data from the US market during the latest decades. They have, also, found that the explanatory power of accounting variables has declined. On the other hand, Collins, Maydew and Weiss (1997) have expressed the opinion that the combined relevance of earnings and book values is progressively increasing over time. On the contrary, the relevance of extraordinary
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