IMPACT OF ACCOUNTING INFORMATION ON STOCK PRICE: EVIDENCE FROM COLOMBO STOCK EXCHANGE
Lakruwani, K.B.1 and Gunarathna, K.G.P.V.2*
12Department of Accountancy, Faculty of Management and Finance, University of Ruhuna, Matara, Sri Lanka
1kblakruwani99@gmail.com,2gunarathnavijitha@gmail.com
ORCID: 0009-0006-0835-1720
ABSTRACT
Accurate, trustworthy and relevant accounting information is essential for evaluating financial conditions and business performance, allowing decision-makers to make well-informed decisions. However, there is a scarcity of research which examins the impact of accounting information on stock price in the Sri Lankan context. This research endeavours to evaluate the value relevance of accounting information which tells the impact of accounting information on stock price, with a particular emphasis on net asset value and earnings. The study also accounts for firm size and financial leverage by examining listed consumer service companies and food, beverage, and tobacco companies in Sri Lanka from 2017 to 2022. The sample encompasses all firms in these industries, although those with unavailable data are excluded. Regression analysis and descriptive statistics were implemented to ascertain the relationships among the chosen variables. Accounting information, including net asset value and firm size, has a substantial positive impact on stock prices, as reported by the findings. Contrary to this, earnings demonstrate an insignificant influence. While the industry factor also has a substantial impact, financial leverage has a substantial negative impact on stock prices. These results offer significant insights for policymakers, investors, and managers, allowing them to enhance accounting information’s accuracy, reliability, and relevance and decision-making processes.
Keywords: Accounting information, Earnings per share, Net assets value per share, Value relevance, Stock price
