The value relevance of financial reporting on the Oslo Stock Exchange

Abstract

This paper focuses on the value relevance of accounting numbers in Norway over the period 1968–2002. This period covers a number of large, and distinct, changes in Norwegian accounting practice, which so far has culminated in the earnings oriented Accounting Law of 1998. Although there is no overall significant increase (or decrease) in value relevance of financial statements over time, it is high and found to increase when earnings are negative and stock market returns are low. Industrial sector turns out to be an important factor explaining value relevance, as a negative relationship exists between value relevance and the amount of intangible assets. Our paper also demonstrates that methodological difficulties are very likely to appear in regression based value relevance analyses and have to be dealt with very carefully.