engleski

Value relevance of banks: evidence from Croatia

The purpose of this paper is to analyze value relevance of accounting information for Croatian banks. Most of researches conducted in the area of value relevance are focused on nonfinancial companies and therefore it is interesting to analyze are accounting information published in bank's financial statements value relevant. The usefulness of accounting information in the process of decision making is also examined through value relevance analysis and information about usefulness and quality of bank's financial statements are interesting not only to investors on the capital markets but also to bank supervisors. A value relevance analysis was conducted by using F-O valuation framework. According to F-O model market value of a company can be expressed as a function of accounting information, i.e. earnings and book value. In this research authors analyzed the value relevance of banks whose shares were listed on the Croatian capital market at the end of 2011. In 2011 Croatian banking sector consisted out of 32 banks but only 12 banks were traded on Zagreb Stock Exchange. Therefore research was limited only on a sample of 12 banks, meaning that sample included 37.5% of banks that operated in the Republic of Croatia at the end of year 2011. Research results indicate that book value was positively and significantly related to share prices while earnings were not related to share prices. More precisely, regression coefficient on book value amounted 0.617 (sig. 0.0001) and regression coefficient on earnings was 0.359 (sig. 0.586). Generally observed, it can be concluded that accounting information published in financial statements of banks are value relevant, i.e. related to share prices since regression model was significant as a whole (sig. 0.0001). Total explanatory power of accounting information measured through coefficient of determination amounted 97.3%.

accounting information ; banks ; value relevance

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