THE IMPACT OF THE FAIR VALUE ON THE RELEVANCE OF BOOK VALUE AND NET PROFIT ON THE MARKET VALUE OF COMMON STOCK: EVIDENCE FROM THE STOCK EXCHANGE OF THAILAND
Article Sidebar
Main Article Content
Abstract
This study aims at investigating relevance of book value, net profit, and the fair value effect on market value of common stock of listed company in the Stock Exchange of Thailand. The financial data of the sample group selected by the specific method of 261 companies, totaling 1,044 firm-years are used for this study that includes the effect of using the fair value approach presented in the financial statements of listed companies throughout the period of using the fair valuation approach since 2016–2019. Descriptive statistics and multiple regression analysis are used for data analysis at 95% confidence intervals. The results show that book value and net profit has a positive correlation with the market value of common stock, while the effect from the fair value approach was negatively correlated. Therefore, it can be said that reporting the impact from the fair value method, both in the part shown as other comprehensive income and included in the book value, net profit, is relevant to the investment decision in the common stock of companies listed on the Stock Exchange of Thailand by being related to the market value of ordinary shares in different directions.
Article Details
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
The contents in Business Administration and Economics Review can be used for publication. But do not modify, modify or use it for trade and profit.
References
Antonio, M. (2016). The Pros and Cons of Fair Value Accounting in a Globalized Economy: A Never-Ending Debate. Journal of Accounting, Auditing & Finance, 31(4) 582– 591.
Ayres, D., Huang, X. S., & Myring, M. (2017). Fair value accounting and analyst forecast accuracy. Advances in accounting, 37, 58-70.
Ball, R. (2006). International Financial Reporting Standards (IFRS): pros and cons for investors. Accounting and business research, 36(sup1), 5-27.
Barth, M. E. (1994). Fair value accounting: Evidence from investment securities and the market valuation of banks. Accounting review, 1-25.
Barth, M. E., Beaver, W. H., & Landsman, W. R. (2001). The relevance of the value relevance literature for financial accounting standard setting: another view. Journal of accounting and economics, 31(1-3), 77-104.
Chang, J. (1998). The Decline in Value Relevance of Earnings and Book Values. USA: Wharton School University of Pennsylvania.
Collins, D. W., Maydew, E. L., & Weiss, I. S. (1997). Changes in the value-relevance of earnings and book values over the past forty years. Journal of accounting and economics, 24(1), 39-67.
Diana, C. I. (2015). Fair Value Measurement Under IFRS 13. Annals of'Constantin Brancusi'University of Targu-Jiu. Economy Series, (3).
Eccher, E. A., Ramesh, K., & Thiagarajan, S. R. (1996). Fair value disclosures by bank holding companies. Journal of accounting and economics, 22(1-3), 79-117.
Hodder, L., Hopkins, P., & Schipper, K. (2014). Fair value measurement in financial reporting. Foundations and Trends in Accounting, 8(3-4), 143-270.
Jensen, M. C. (1978). Some anomalous evidence regarding market efficiency. Journal of financial economics, 6(2/3), 95-101.
Khamwongpin, S. (2010). Fair Value Measurement. Journal of Accounting Profession, 6(15), 94-105.
Khurana, I. K., & Kim, M. S. (2003). Relative value relevance of historical cost vs. fair value: Evidence from bank holding companies. Journal of accounting and public policy, 22(1), 19-42.
Kimbro, M. B., & Xu, D. (2016). The accounting treatment of goodwill, idiosyncratic risk, and market pricing. Journal of Accounting, Auditing & Finance, 31(3), 365-387.
Lev, B. (1989). On the usefulness of earnings and earnings research: Lessons and directions from two decades of empirical research. Journal of accounting research, 27, 153-192.
Lev, B., & Zarowin, P. (1999). The boundaries of financial reporting and how to extend them. Journal of Accounting research, 37(2), 353-385.
Lin, S., Martinez, D., Changjiang Wang, & Ya-wen Yang. (2018). Is Other Comprehensive Income Reported in the Income Statement More Value Relevant? The Role of Financial Statement Presentation. Journal of Accounting, Auditing & Finance, 33(4), 624–646.
Marra, A. (2016). The pros and cons of fair value accounting in a globalized economy: A never ending debate. Journal of Accounting, Auditing & Finance, 31(4), 582-591.
McGregor, S. (2022). Fair value accounting impact on decision-usefulness of accounting information: evidence from accounting standards update 2016–01 on the US insurance industry. Journal of Financial Reporting & Accounting (Emerald Group Publishing Limited), 20(5), 926–952.
Mihaela, R. C., Costin, B. V., & Andreia, M. (2022). Value Relevance of Other Comprehensive Income and Fair Value Measurement. Annals of “Constantin Brancusi” University of Targu-Jiu. Economy Series, 4, 293–297.
Mitra, S. and Mahmud, H. 2009. “Value-Relevance of Pension Transition Adjustments and Other Comprehensive Income Components in the Adoption Year of SFAS No. 158.” Review of Quantitative Finance & Accounting, 33 (3), 279–301.
Nelson, K. K. (1996). Fair value accounting for commercial banks: An empirical analysis of SFAS No. 107. The Accounting Review, 71(2), 161-182.
Royal Gazette. (2017). Announcement of the Federation of Accounting Professions, Volume 134, Special Section 236 Ngor, page 10, announced on 5 July 2017.
Royal Gazette. (2017). Announcement of the Federation of Accounting Professions, Volume 136, Special Section 238 Ngor, page 10, announced on 13 August 2019.
Simko, P. J. (1999). Financial instrument fair values and nonfinancial firms. Journal of Accounting, Auditing & Finance, 14(3), 247-274.
Srijunpetch, S. (2017). Auditor and Fair Value Auditing. Business Administration Journal Association of Private Higher Education Institutions of Thailand under the royal patronage HRH Princess Maha Chakri Sirindhorn Siam Boromarajakumari, 5(2), 9-15.
Tiengtrakul, A. (2009). The Fair Value Concept of Assets and Liabilities. Net Review Dhurakij Pundit University, 107-126.
Wang, X., Jiang, H., & Lu, M. (2019). Does the Reporting Location of Other Comprehensive Income Matter? The Investor’s Perspective. Australian Accounting Review, 29(3), 546–555.
Weijun, N. (2007). The Effect of Fair Value Accounting in HKAS 40 on Real estate companies Listed in Hong Kong. Hong Kong Baptist University.
Yousefinejad, M., Ahmad, A., & Embong, Z. (2017). Value Relevance of Other Comprehensive Income and Its Available-For-Sale Financial Instruments (AFS) and Revaluation Surplus of Property, Plant and Equipment (REV) Components. Asian Journal of Accounting & Governance, 8, 133–143.