Farha Ibrahim

This paper investigates the value relevance of the financial information reported by energy companies included in the NSE Energy Index after the mandatory adoption of the Indian Accounting Standards (Ind AS) for the 2016–2017 accounting year. The fixed-effects model was employed on the panel data of energy companies included in the NSE Energy Index to study the impact of the accounting information on the market price of the shares for the period 2017–2021. The study suggests that a company’s book value consistently explained the variation in the market price across each year individually. Moreover, with the control of time across firms for the study period, book value per share and net cash flow from investing activities have significant explanatory power on the market price of a company’s shares. Profit after tax, which is widely used to determine a firm’s performance, cannot explain the variability in the market price of shares.

In 2016, India implemented new accounting standards, Ind AS, aligning with IFRS to increase transparency in the financial reporting of Indian companies. This study examines the value relevance of financial information in India before and after the adoption of Indian accounting standards (Ind AS) by comparing the published financial statements in pre- and post-Ind AS periods and determines the influence of financial information on the market price of shares. The study period is for twelve years, from 2011 to 2022, divided into 2011–2016 (pre-Ind AS period) and 2017–2022 (post-Ind AS period). To evaluate the value relevance of financial information, the Ohlson pricing model is employed on the panel data of the blue-chip companies listed in the Nifty 50 Index. The results from the Least Squares regression reveal that the net cash from investing activities, profit-after-tax, and book-value-per-share were relevant for investment decisions prior to the adoption of the Ind AS. In contrast, the profit-after-tax had no explanatory power during the post-Ind AS period. However, the net cash from investing activities and the book-value-per-share significantly influenced the market price of equity since the implementation of Ind AS. The value relevance of the accounting statements was superior in the pre-Ind AS period compared to the post-Ind AS.