Analysis of the Relevance of Information Content of the Value Added Statement in the Brazilian Capital Markets

13 Pages Posted: 2 May 2015

See all articles by Marcio Andre Veras Machado

Marcio Andre Veras Machado

Federal University of Paraiba (UFPB)

Marcelo Alvaro Macedo

Universidade Federal do Rio de Janeiro (UFRJ)

Márcia Machado

Federal University of Paraiba (UFPB)

Date Written: May 1, 2015

Abstract

The usefulness of financial statements depends, fundamentally, on the degree of relevance of the information they disclose to users. Thus, studies that measure the relevance of accounting information to the users of financial statements are of some importance. One line of research within this subject is in ascertaining the relevance and importance of accounting information for the capital markets: if a particular item of accounting information is minimally reflected in the price of a share, it is because this information has relevance, at least at a certain level of significance, for investors and analysts of the capital markets. This present study aims to analyze the relevance, in the Brazilian capital markets, of the information content of the Value Added Statement (or VAS) – referred to in Brazil as the Demonstração do Valor Adicionado, or DVA. It analyzed the ratio between stock price and Wealth created per share (WCPS), using linear regressions, for the period 2005-2011, for non-financial listed companies included in Melhores & Maiores (‘Biggest & Best’), an annual listing published by Exame Magazine in Brazil. As a secondary objective, this article seeks to establish whether WCPS represents a better indication of a company’s result than Net profit per share (in this study, referred to as NPPS). The empirical evidence that was found supports the concept that the VAS has relevant information content, because it shows a capacity to explain a variation in the share price of the companies studied. Additionally, the relationship between WCPS and the stock price was shown to be significant, even after the inclusion of the control variables Stockholders’ equity per share (which we abbreviate in this study to SEPS) and NPPS. Finally, the evidence found indicates that the market reacts more to WCPS (Wealth created per share) than to NPPS. Thus, the results obtained give some indication that, for the Brazilian capital markets, WCPS may be a better proxy concept for referring to a company’s result than NPPS.

Keywords: relevance of accounting information, Value Added Statement, wealth created

JEL Classification: M40, M41

Suggested Citation

Machado, Marcio Andre Veras and Macedo, Marcelo Alvaro and Machado, Márcia, Analysis of the Relevance of Information Content of the Value Added Statement in the Brazilian Capital Markets (May 1, 2015). Available at SSRN: https://ssrn.com/abstract=2601211 or http://dx.doi.org/10.2139/ssrn.2601211

Marcio Andre Veras Machado (Contact Author)

Federal University of Paraiba (UFPB) ( email )

Centre for Applied Social Sciences
Graduate School of Management
João Pessoa, Paraiba
Brazil

Marcelo Alvaro Macedo

Universidade Federal do Rio de Janeiro (UFRJ) ( email )

Av; Pasteur, 250
terreo - Bairro Maracana
Rio de Janeiro, Rio de Janeiro 23890000
Brazil

Márcia Machado

Federal University of Paraiba (UFPB) ( email )

Cidade Universitária
s/n - Castelo Branco III
João Pessoa, Paraiba 58297-000
Brazil

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