Which Financial Information Leads to Better Market Valuation and Economic Decision Making in Malaysian Main Market Listed Firms? A Value Relevance Perspective

Abstract

This paper examines the value relevance of financial information, available in the financial statements of publicly listed Malaysian main market firms. The sample of 257 public listed firms was used to test the hypotheses over the period 2012-2018, based on 1799 firm’s year observations. This study has used Prais-Winsten Panel Corrected Standard Errors (PCSE) multivariate regression due to the presence of cross-sectional dependence (CSD) in the panel data set. Findings of the study revealed that primary accounting information earnings is losing its value relevance due to the managerial manipulation practices by Malaysian public listed companies. Investors are now relying more on other accounting information such as book value of equity (BVE) and dividends for making economic decisions. Therefore, this situation highlights the importance of dividends along with book value of equity in taking economic decisions related to the investment from the investor’s perspective. These findings also offer policy implications for Malaysian regulators and the International Accounting Standard Board (IASB) regarding the improvement in the quality of accounting earnings along with the curtailment in the managerial opportunism. This study also makes a significant contribution to the value relevance literature from a developing countries’ view by offering empirical findings based on the large data set in the Malaysian context.