Changing value relevance

This paper investigates value relevance in France, Germany, the Netherlands and the United Kingdom over the period 1991-2011. In contrast to most previous researches, value relevance is not only measured by coefficients of determination, but also by abnormal pricing errors (Gu, 2007). Three main findings are reported. First, value relevance appears to be stable in the sample countries over the period 1991-2004, after which there is a significant increase in value relevance that appears to be caused by the mandatory adoption of IFRS in 2005. Second, firms experiencing high amounts of business change have significantly lower value relevance than firms experiencing little business change. Finally, there does not appear to be a difference in the value relevance of financial statements in the Netherlands and the United Kingdom, countries classified as having a market-oriented financial system, compared to that of financial statements in Germany and France, countries classified as having a bank-oriented financial system.