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Exploring the relationship between market values and accounting numbers of firms listed in an emerging market.

Suwardi, Eko (2004) Exploring the relationship between market values and accounting numbers of firms listed in an emerging market. PhD thesis, Queensland University of Technology.

Abstract

Studies of the relationship between market values and accounting numbers have long been a part of an established theme in capital markets research (CMR). These studies have taken various forms, most being conducted on a cross sectional basis, tied closely with the assumptions of equilibrium behaviour and efficient markets.

Explanatory variables for market value have been dominated by firm-specific variables without incorporating macroeconomic variables. Recently, however, some studies have employed macroeconomic variables and dynamic specification in assessing the relationship between market values and accounting numbers (e.g. Bilson et al. 2001, Nissim and Penman, 2003, and Willett, 2003).

The objective of this thesis is to investigate the nature of the relationship between share prices and accounting numbers on the Jakarta Stock Exchange for the period 1992-2002, using dynamic modelling principles in addition to the more usual cross sectional analysis. The approach to regression modelling (general-to-specific strategy)incorporated in this thesis relies less heavily than most CMR on prior economic theories of equilibrium behaviour. Apart from these novel aspects of approach and

method, the study also provides valuable information about the emerging financial

markets of Indonesia.

The results of this thesis show that cointegration and the accompanying equilibrium

correction relationship between market and book values for firms listed on the Jakarta Stock Exchange (JSX) can often be identified using accounting and macroeconomic regressors. The models are typically more informative, plausible and consistent than cross sectional models and are useful in interpreting the context in which the market to book relationship exists in Indonesia. A possibly surprising result is that in Indonesia, compared to similar models estimated using US data, the book value of net assets seems to have a stronger relationship with market value. This may be a function of the

relative importance of financial statements as a source of information on the JSX.

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ID Code: 15986
Item Type: QUT Thesis (PhD)
Supervisor: Willett, Roger& Mirza, Abdul
Keywords: capital market research, value relevance, fundamentals, time series anaylsis, cointegration, error correction models, indonesian financial market, emerging markets
Divisions: Current > QUT Faculties and Divisions > QUT Business School
Current > Schools > School of Accountancy
Department: Faculty of Business
Institution: Queensland University of Technology
Copyright Owner: Copyright Eko Suwardi
Deposited On: 03 Dec 2008 13:54
Last Modified: 29 Oct 2011 05:41

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