Bixia Xu
Wilfrid Laurier University
Michel Magnan
Concordia University
Paul Andre
HEC-Montreal
Abstract: We argue that financial information and non-financial performance information not only complement, but also interact with, each other in capital markets. These interactions allow each of them to gain an indirect ability to explain and predict stock price behaviour. This indirect ability constitutes an integral part of their value relevance. Hence, we propose an interactive perspective for evaluating the value relevance of both financial information and non-financial performance information, which allows a more complete understanding of the value relevance of the two types of information. In the context of the biotechnology industry, our results indicate that financial information can lead to a better interpretation of non-financial performance information; in turn, non-financial performance information can lead to a better interpretation of financial information.
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