Author

  • Jihene Chedlia Soussi

    • ISG Tunis

  • Mounira Ben Arab

    • ISG Tunis

Abstract

Information disclosure by firms has grown considerably. The increased level of firms’ disclosure has been accompanied by the loss of relevance of accounting information over time (Lev, 1989, Ramech and Thiagarajan, 1995, Lev and Zarowin, 1999, Brown and al, 1999, Chang, 1999 and Chalmers and al, 2011). Our objective is to determine whether the voluntary disclosure explains the low relevance of accounting information. We find that medium-technology companies have the highest level of relevance of accounting information. However, the relevance of the accounting model is low for lowtechnology firms and high technology firms. The introduction of the overall disclosure index and subindexes of disclosure has an effect on the relevance of the accounting model (this effect is significant only in some cases for low-tech firms). Furthermore, the addition of variables of disclosure to the accounting model makes the accounting variables relevant to investors for low-tech firms. For medium-tech firms, book values and earnings are relevant. While, for high technology firms, only the earnings are relevant. We also show that the introduction of intangible expenses, the weight of intangibles and the index of disclosure on intangibles is growing, but not significantly the relevance of the accounting model.

Keywords

References

  • Aboody, D. & Lev, B. (1998). The value relevance of intangibles: The case of software capitalization. Journal of Accounting Research , Supplement 1998, 161-191.
  • Ahmed, K. & Falk, H. (2006). The value relevance of management's research and development reporting choice: Evidence from Australia . Journal of Accounting and Public Policy , 25(3), 231.
  • Allen, S. (2003). Understanding book value for investors. Canadian stock picks and stock research, investorsfriends.com.
  • Al-Shammari, B. & Al-Sultan, W. (2010).Corporate governance and voluntary disclosure in Kuwait. International Journal of Disclosure and Governance , 7(3), 262–280.
  • Amir, E. & Lev, B. (1996). Value-relevance of non financial information: the wireless communications industry. Journal of Accounting and Economics, 22, 3–30.
  • Balachandran, S. & Mohanram, P. (2011). Is the decline in the value relevance of accounting driven by increased conservatism? Review of Accounting Studies , 16(2), 272.
  • Banghøj, J. &Plenborg, T. (2008). Value relevance of voluntary disclosure in the annual report. Accounting and Finance, 48(2), 159.
  • Barth, M. E., Beaver, W. H. & Landsman, W. R. (1998). Relative valuation roles of equity book value and net income as a function of financial health. Journal of Accounting and Economics, 25, 1-34.
  • Barth, M. E., Landsman, W. R. & Lang, M. H. (2008). International Accounting Standards and Accounting Quality. Journal of Accounting Research , 46(3), 467.
  • Beattie, V., Goodagre, A. &Thomson, S. (2000). Recognition versus disclosure: An investigation of the impact on equity risk using UK operating lease disclosures. Journal of Business, Finance and Auditing, 27(9) and (10).
  • Bernard, V. & Schipper, K. (1994). Recognition and disclosure in financial reporting. working paper, University of Michigan and University of Chicago.
  • Botosan, C. A. (1997). Disclosure level and the cost of equity capital. The Accounting Review , 72(3), 323– 350.
  • Brown, S., Lo, K. & Lys, T. (1999). Use of R2 in accounting research: measuring changes in value relevance over the last four decades. working paper, Northwestern University.
  • Callimaci, A. & Landry, S. (2004). Market valuation of Research and Development Spending under Canadian GAAP . Canadian Accounting Perspectives, 3(1), 33.
  • Cazavan-Jeny, A. (2004). Le ratio market-to-book et la reconnaissance des immatériels- une étude du marché français. Comptabilité-Contrôle-Audit , 10 (2), 99-124.
  • Chalmers, K., Clinch, G. & Godfrey, J. M. (2011). Changes in value relevance of accounting information upon IFRS adoption: Evidence from Australia. Australian Journal of Management , 36(2), 151–173.
  • Chang, J. (1999). The decline in value relevance of earnings and book values. working paper, University of Pennsylvania, Philadelphia, January 1999.
  • Cheng, C. S. A., Hsieh, S. J. & Yip, Y. (2007). Impact of accounting choices on firm valuation and earnings Quality The case of transition obligation under SFAS 106. Review of Accounting and Finance , 6(4), 419-441.
  • Christie, A. (1987). On cross-sectional analysis in accounting research. Journal of Accounting and Economics, 9, 231-258.
  • Collins, D., Maydew, E. & Weiss, I. (1997).Changes in the value-relevance of earnings and book values over the past forty years. Journal of Accounting and Economics, 24(1), 39–68.
  • Cottle, S., Murray, R. & Block, F. (1998). Graham and Dodd’s security analysis. 5th ed, New York: McGraHill.
  • Ding, Y., Entwistle, G. & Stolowy, H. (2004). International differences in research and development reporting practices: a French and Canadian comparison. Advances in International Accounting , 17, 55-72.
  • Dontoh, A. , Radhakrishnan, S. & Ronen, J. (2004). The Declining Value-relevance of Accounting Information and Non-information-based Trading: An Empirical Analysis. Contemporary Accounting Research, 21(4), 795-18.
  • Ely, K. & Waymire, G. (1999). Intangible assets and stock prices in the Pre-SEC Era. Journal of Accounting Research , 37, 17-51.
  • Gelb, D. S. & Zarowin, P. (2002). Corporate Disclosure Policy and the Informativeness of Stock Prices. Review of Accounting Studies, 7, 33–52.
  • Goodwin, J. (2002). Longitudinal Earnings Value Relevance and Intangible Assets: Evidence from Australian Firms, 1975-99. March 2002, working paper, Trobe University, School of Business, www.ssrn.com .
  • Goodwin, J. & Ahmed , K . (2006).Longitudinal value relevance of earnings and intangible assets: Evidence from Australian firms. Journal of International Accounting, Auditing and Taxation, 15, 72–91.
  • Healy, P., Hutton, A. & Palepu, K. (1999a). Stock performance and intermediation changes surrounding sustained increases in disclosure. Contemporary Accounting Research, 16(2).
  • Healy, P., Myers, S. & Howe, C. (1999b). R&D accounting and the tradeoff between relevance and objectivity. working paper, Harvard Business School.
  • Holthausen, R. W. & Watts, R. L. (2001). The relevance of the value-relevance literature for financial accounting standard setting. Journal of Accounting and Economics , 31, 3-75.
  • Lapointe-Antunes, P. , Cormier, D. , Magnan, M . & Gay-Angers, S. (2006). On the Relationship between Voluntary Disclosure, Earnings Smoothing and the Value - Relevance of Earnings: The Case of Switzerland. European Accounting Review , 15(4), 465.
  • Lee, B. B., Press, E. & Choi, B. B. (2005).Why is the Value Relevance of Earnings Lower for High-Tech Firms? January 2005, working paper, www.ssrn.com.
  • Lev, B. (1989). On the usefulness of earnings and earnings research: Lessons and directions from two decades of empirical research, Journal of Accounting Research , Supplement 1989, 153-192.
  • Lev, B. & Sougiannis T. (1996). The capitalization, amortization and value relevance of Research and Development. Journal of Accounting and Economics , February 1996, 107-138.
  • Lev, B. & Zarowin, P. (1999). The boundaries of financial reporting and how to extend them. Journal of Accounting Research , 37 (2), 353-385.
  • Lo, K. (2004). The effect of scale differences on inferences in accounting research coefficient estimates, tests of incremental association and relative value relevance. Working paper, September 2004.
  • Lopes, A. B. (2003).The Value Relevance of Brazilian Accounting Numbers: An Empirical Investigation. Working paper, University of Sao Paulo , May 2003.
  • Lang, M. & Lundholm, R. (1993). Cross-sectional determinants of analysts’ ratings of corporate disclosures. Journal of Accounting Research , 31, 246–271.
  • Lim, S. C. & Park, T. (2011). The declining association between earnings and returns; Diminishing value relevance of earnings or noisier markets? Management Research Review , 34(8), 947.
  • Lundholm, R. & Myers, L. A. (2002).Bringing the future forward: The effect of disclosure on the returns earnings relation. Journal of Accounting Research, 40, 809-839.
  • Luo, S., Courtenay, S. M. & Hossain, M. (2006).The effect of voluntary disclosure, ownership structure and proprietary cost on the return–future earnings relation. Pacific-Basin Finance Journal , 14, 501– 521.
  • Narktabtee, K. & Patpanichchot, S. (2011).The impact of country – level versus firm – level factors on the effectiveness of IFRS adoption: The case of European Union. International Business and Economics Research Journal , 10(10).
  • Ohlson, J. A. (1995). Earnings, book value, and dividends in equity valuation. Contemporary accounting research, 11, 661-687.
  • Oswald, D. R. (2008). The Determinants and Value Relevance of the Choice of Accounting for Research and Development Expenditures in the United Kingdom. JOURNAL, 35(1/2), 1.
  • Ramesh, K. & Thiagarajan, R. (1995). Inter-temporal Decline in Earnings Response Coefficients . Working Paper , Northwestern University, Evanston, IL.
  • Soussi, J. C., Matoussi, H. & Mouelhi, R. (2006). Intangibles and low relevance of accounting information. Master thesis in accounting, ISCAE of Tunis, may 2006.
  • Trabelsi, S. & Labelle, R. (2006). Evidence that Corporate Websites is a Part of the Firm’s Overall Disclosure Package. May 2006, working paper, www.google.com.
  • Wang, W. (2000) . Discretionary choices of accounting methods and value relevance: R&D accounting in the software industry. Ph.D. Dissertation, Washington University , 57 pages, http://proquest.umi.com .
  • Zhao, R. (2002). Relative value relevance of research and development reporting: An international comparison. Journal of International Financial Management and Accounting , 13(2), 153-174.

Downloads

No downloads have been recorded for this article yet. Figures appear here once readers begin downloading the full text.

How to Cite

Soussi, J. C., & Ben Arab, M. (2012). Impact of Voluntary Disclosure on the Relevance of Accounting Information. Journal of Education and Vocational Research, 3(5), 138-153. https://doi.org/10.22610/jevr.v3i5.61

Share this article

License

Copyright (c) 2012 Jihene Chedlia Soussi, Mounira Ben Arab (Author)

Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.

Author (s) should affirm that the material has not been published previously. It has not been submitted and it is not under consideration by any other journal. At the same time author (s) need to execute a publication permission agreement to assume the responsibility of the submitted content and any omissions and errors therein. After submission of revised paper in the light of suggestions of the reviewers, the editorial team  edits and formats manuscripts to bring uniformity and standardization in published material.

This work will be licensed under Creative Commons Attribution 4.0 International (CC BY 4.0) and under condition of the license, users are free to read, copy, remix, transform, redistribute, download, print, search or link to the full texts of articles and even build upon their work as long as they credit the author for the original work. Moreover, as per journal policy author (s) hold and retain copyrights without any restrictions.

Keywords

Section

Research Paper

Published in

Vol. 3 No. 5 (2012) Learning Analytics, Competencies & Education Returns View issue contents

Published

2012-05-15

Submissions

Have research to publish? Journal of Education and Vocational Research welcomes submissions.

Make a Submission