The Value Relevance of Earnings and Book Value: The Importance of Ownership Concentration and Firm Size

Abstract

The purpose of this paper is to investigate the impact of ownership concentration and firm size on value relevance of two accounting variables, earnings and book value, given by firms listed in Colombo Stock Exchange (CSE) in Sri Lanka from 2005 to 2009. Using pooled cross-sectional data regressions, the study finds that the value relevance of earnings and book value is below average. The value relevance of ownership concentrated firms is higher than that of ownership non-concentrated firms. Further, the two variables show higher value relevance for larger firms than for smaller firms. Contrary to the previous findings of the author, the study finds that book value is more value relevant than the earnings in Sri Lanka.