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The value relevance of financial statements and their impact on stock prices: Evidence from Greece

By Panagiotis E. Dimitropoulos and Dimitrios Asteriou


Purpose – The aim of this paper is to examine the relevance of financial reporting. In order to achieve this, a model that includes specific ratios is developed, which have proved to be indicators of falsified financial statements in the Greek capital market, and by estimating accruals quality, measured both by discretionary and non-discretionary accruals. Design/methodology/approach – The data were collected from a sample of 101 non-financial firms listed at the Athens stock exchange. The time frame spans from 1995 to 2004 and the methodology used was OLS regression models. Findings – The results indicate that the ratios of working capital to total assets and net profit to sales have a negative impact on stock returns, while the ratios of net profit to total assets and sales to total assets affect returns positively. Additionally, both types of accruals have incremental importance – with the non-discretionary appearing to be more important compared to the discretionary one – in explaining stock return movements. Thus, it is concluded that the Greek stock market depicts prices accruals. Originality/value – The present study adds to the existing literature by examining the issue of financial reporting relevance within the context of an emerging capital market such as Greece. This is believed to be the first study which considers the aforementioned issues in the Greek accounting setting.Financial reporting, Greece, Stock prices

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