An-Najah University Journal for Research - B (Humanities)




The International Financial Reporting Standards (IFRS) are supposed to raise the value relevance of accounting information and thus ensure its usefulness for users. Most of the studies on the relevance of IFRS-based accounting information were conducted in countries that had previous accounting standards before the adoption of IFRS. However, the relevance of accounting information is influenced by the accounting traditions inherited from previous practices. This study provides distinctive evidence on the relevance of IFRS accounting information by examining the association between accounting information prepared by Palestinian companies and share prices. Palestine represents a pure IFRS environment since IFRS is its first financial reporting framework. The study estimates the impact of accounting information, including book value of equity per share, earnings per share, and operating cash flow per share, on the market value of the share. Totally, the results show that the accounting numbers prepared by Palestinian companies are relevant. Precisely, earnings per share and book value of equity per share are the important variables in determining the share market value. Notwithstanding, no significant impact of operating cash flow per share has been observed. Moreover, evidence supporting the existence of conformity and predictive relevance is obtained, but the overall predictive relevance is higher. To enhance the relevance of IFRS information, this paper recommends local regulators and policymakers to work on improving the readiness of the Palestinian environment to fully benefit from the adoption of IFRS. On the other hand, the International Accounting Standards Board should adequately consider the circumstances prevailing in underdeveloped countries when issuing its standards. For future research, larger samples from several countries with different prevailing factors should provide insights into the mechanisms of the relationship between book and market values.

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