The stock market valuation of earnings and book value across international accounting systems

This thesis studies the value relevance of earnings and book value in an international context. The main hypotheses are based on three accounting themes relating to the stock market valuation of hook value and earnings: (1) the relative importance of balance sheet versus income statement information for valuation. (2) the "fairness" of an accounting system. (3) the degree of conservatism in an accounting system. As the institutional differences between the accounting systems in Germany, France, and the U.K. are often discussed in terms of these three accounting themes, the key step in the development of the hypotheses is the recasting of these institutional differences in terms of the three accounting themes.;The main results can be summarized as follows. First, consistent with the predictions, the results show that the explanatory power of book value for price is larger than that of earnings in Germany and France. However, these differences are not significant in either case. The prediction is borne out by the data in the U.K.: the explanatory power of earnings for price is significantly higher than that of book value.;Second, consistent with the prediction, the explanatory power for earnings is significantly larger in the U.K. than in Germany. However, the results document that, surprisingly, earnings in France obtain a larger explanatory power for price than earnings in the U.K.;Third, consistent with the prediction, book value coefficients are significantly larger in Germany and France than in the U.K. However, the coefficient on earnings is larger in the U.K. than in Germany or France. This pattern of results suggests that the earnings coefficients is determined by factors other than conservatism in the accounting system.;The thesis also addresses cross-sectional variation in valuation multiples and association measures of earnings and book value in valuation equations in the European samples: (1) it documents the within-country variation in valuation multiples and association measures of earnings and book value. (2) it shows that the cross-country results do not change after taking into account within-country cross-sectional factors.;The thesis additionally reports results relating to the cross-sectional variation in valuation multiples and association measures of earnings and book value in valuation equations in a U.S. sample and relating to the empirical specification of the Ohlson fundamental accounting value framework in the European context.