Value relevance of earnings and book value of equity in Malaysia / Asyaari Elmiza Ahmad

This study examines the changes in the value relevance and the effect of
Asian financial crisis towards the explanatory power for both the accounting
variables. By employing Ohlson's (1995) market valuation models, the results
obtained are consistent with the prediction that there are mixed evidence of
value relevance for earnings and book value of equity. The findings suggest
that the value relevance of earnings and book value of equity are neither
declining nor inclining for the Malaysian main board listed firms. This study
also reveals that the value relevance of book value of equity is significantly
larger than accounting earnings during the Asian financial crisis in 1997 and
1998. The findings are consistent with the prediction of prior studies that
book value of equity is more relevant as compared to earnings in the event of
financial difficulties facing the firms. As a conclusion, this study presents the
evidence that the financial reporting systems in Malaysia are still relevant for
the investors in the valuation of the market share prices.