Accounting information, value relevance, and investors' behavior in the Egyptian equity market

Purpose - The purpose of this paper is to examines empirically whether national and international investors in the Egyptian stock market perceive accounting information based on the Egyptian Accounting Standards to be useful in stock valuation. Design/methodology/approach - Using a sample of all available listed firms in the emerging market data base from 1998 to 2002, evidence of the value relevance of accounting information in Egypt was obtained, based on both return and price models. Findings - The results suggest that stock prices in Egypt are less information about the future value of the firm than is accounting information. It is perhaps unreasonable to conclude that accounting information has higher value relevance in Egypt because financial reporting is of higher quality. It might, however, imply that competing information sources such as earnings forecasts, firm research by financial analysts, management conference calls, etc. are far less relevant in Egypt. Originality/value - This study is of value in that it highlights how the Egyptian stock market needs complementary information sources other than published accounting reports, to become more informationally efficient.