The Relationship between Financial Statement Comparability and the Value Relevance of Accounting Information: The Moderating Role of Earnings Management (Evidence from Listed Companies on the Egyptian Stock Exchange)

Document Type : Original Article

Authors

1 Lecturer, Department of Accounting and Auditing, Faculty of Commerce, Sohag University

2 Assistant Professor, Department of Accounting and Auditing, Faculty of Commerce, South Valley University

Abstract

This study aims to examine the effect of earnings management on the relationship between the comparability of financial statements and the value relevance of accounting information.
A content analysis approach was employed to collect the necessary data for statistical analysis, which was conducted using STATA V.17. The sample comprises 100 non-financial companies listed and actively traded on the Egyptian Stock Exchange, covering a total of 500 firm-year observations over the period from 2015 to 2019.
Given its originality and scientific contribution, this study enriches accounting literature by exploring the informational, monitoring, and knowledge-based roles played by financial statement comparability. To the best of the researchers’ knowledge, this is the first empirical study to investigate whether earnings management affects the relationship between financial statement comparability and the value relevance of published accounting information for companies listed on the Egyptian Stock Exchange. This contributes to identifying the enabling and constraining conditions of investor responses to published accounting information, thereby expanding the research base in this vital area of value relevance.
Overall, the findings—after controlling for other variables—indicate a significant positive relationship between financial statement comparability and the value relevance of earnings and book value per share. The results also reveal that earnings management is negatively and significantly associated with the value relevance of earnings, while it is positively and significantly associated with the value relevance of book value per share. Moreover, the results show that a higher level of earnings management weakens the positive relationship between comparability and the value relevance of book value per share, whereas it strengthens the positive relationship between comparability and the value relevance of earnings.

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