Value relevance of accounting information on return and risk: evidence from Indian banks

Abstract

This study examines the value relevance of quarterly accounting information on return and risk for a sample of 39 listed banks during 2008-15. The results of a panel data analysis results show that equity prices negatively react to an increase in NPAs reported by banks and positively to a rise in reported accounting returns. Our results also suggest that there are considerable differences in the market reactions of public and private sector banks to accounting published information. In spite of higher accounting returns reported by private sector banks, the market assigns more importance to risk-related information resulting in low equity prices. On further investigation, we also see that this relationship considerably varies with reference to ownership of banks.