Value-Relevance of Nonfinancial Information: The Wireless Communications Industry

Posted: 19 Jun 1995

See all articles by Eli Amir

Eli Amir

Tel Aviv University

Baruch Lev

New York University - Stern School of Business

Abstract

The study examines the value-relevance of reported financial information of fast-changing science-based companies and the incremental value-relevance of publicly available nonfinancial information. Based on a sample of independent cellular phone companies we find that on a stand-alone basis financial information (earnings book values and cash flows) appears largely irrelevant for valuation. However when combined with nonfinancial information these variables contribute to the explanation of stock prices and returns. Also the value- relevance of nonfinancial information overwhelms that of traditional financial indicators. Finally regarding investors' timely recognition of the implications of nonfinancial information we find that a key cellular nonfinancial growth measure -- POPS -- is positively associated with subsequent stock returns after controlling for various risk and growth measures. This may indicate either a systematic investor underreaction to nonfinancial information (market inefficiency) or that this nonfinancial measure proxies for risk.

JEL Classification: G12, M41

Suggested Citation

Amir, Eli and Lev, Baruch Itamar, Value-Relevance of Nonfinancial Information: The Wireless Communications Industry. Available at SSRN: https://ssrn.com/abstract=55497

Eli Amir (Contact Author)

Tel Aviv University ( email )

312 Recanati Bldg.
69978 Tel Aviv
Israel
+972 3 640-8510 (Phone)
+972 3 640-7738 (Fax)

Baruch Itamar Lev

New York University - Stern School of Business ( email )

40 West 4th Street, Suite 400
New York, NY 10012
United States
212-998-0028 (Phone)
212-995-4001 (Fax)

HOME PAGE: http://www.baruch-lev.com

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