THE VALUE RELEVANCE OF FINANCIAL REPORTING IN ROMANIA

This study examines empirically whether investors in the Romanian stock market perceive accounting information based on domestic GAAP to be value relevant. The study is motivated by the value-relevance literature in the emerging stock markets in which Romania is also included. Using a sample of all productive listed companies in the Bucharest Stock Exchange from 2005 to 2008 with available data, we obtain evidence of value relevance of accounting information in Romania based on the return and price models. The results of this study are the following: accounting information is value relevant to investors in the emerging stock markets despite the young age of the market; the improvement of the accounting rules leads to increase the relevance of accounting information; the value relevance of accounting information is greater for the companies which: has positive earnings, are large, recorded a decrease of turnover; and/or are high indebted.