An International Meeting of the American Accounting Association American Accounting Association 2006 Annual Meeting August 6–9, 2006 Washington, D.C.

Wanda Mattei
University of Puerto Rico

Abstract: This study examines the value relevance of the Brazilian financial accounting by examining its association with contemporaneous stock returns. The Brazilian market offers a unique opportunity to study the value relevance of accounting information under two different accounting models, inflation and constant dollar. To examine the association between returns and the accounting variables I initially estimate a benchmark model that includes returns as the dependent variable and earnings levels and earnings changes as the explanatory variables. This model is extended by adding the fundamental signals, macroeconomic indicators, and a dummy variable to indicate the accounting model. The evidence suggests that under stable economic conditions, earnings determined under an accounting model closer to GAAP, are associated with information investors use, but under an accounting model that uses an inflation index, only change in earnings is associated with returns.

Back to Session Listing

AAA Home Page