Abstract:
The investigation of value relevance of accounting information and its implication
for emerging markets have received dearth attention in the literature. This study evaluates
the relation between the value relevance of accounting information and stock price
movement, using data obtained from 20 listed Bank Finance and Insurance companies in Sri
Lanka covering the period of 6 years from 2009 to 2014. In order to select the sample
random, sampling method used. The research design of this study based on a quantitative
approach and analysis secondary data. Data of the selected firms which are listed in the
Colombo stock exchange (CSE) Sri Lanka were obtained from their websites. This study
identifies value relevance of accounting information by three separate financial ratios:
Earning per Share (EPS), Return on Equity (ROE) and Earning Yield (EY) as independent
variable while market price per share (MPS) as a dependent variable of this study. The
statistical tests were used includes: descriptive statistics, correlation and regression
analyses. Through the multiple correlation analysis with the help of user friendly statistical
software it is found, there is significant and positive association between MPS and EPS (P=
0.000, < 0.01). Which indicate that, as the EPS increases it would tend to increase the MPS of
the company. On the other hand, there is significant and negative correlation between MPS
and EY (P=0.045, < 0.05). Which indicate that, as the EY increases it would tend to reduce
the MPS of the company. The study also illustrates that main accounting information proxies
have strong predict powers on variations of market share price.
