Information Content of Earnings in the Emerging Capital Market: Evidence from the Warsaw Stock Exchange

Abstract

This article investigates the association between stock returns and the annual earnings, derived from the new accounting and reporting standards, of firms listed on the Warsaw Stock Exchange between 1995 and 1997. Following a brief history of the Warsaw Stock Exchange, two major issues affecting the effectiveness of the Polish securities market are discussed. These are the transition process from public to private enterprise ownership, and the development of accounting and reporting standards compatible with the capital market requirements and the European Union regulation. The empirical results indicate significant association between stock returns and the annual earnings. Results are compared with those for more developed capital markets.

Keywords: accounting and reporting standards Poland; earnings and returns; privatization; Warsaw Stock Exchange