Page 38 - April_2024 Broucher.indd

Pooja Kumari

Title: Value relevance of earnings and book value of equity in profit versus loss reporting firms:

significance of intangible intensity

Journal: Accounting Research Journal

This study aims to investigate how the intangible intensive nature of

firms affects the value relevance of earnings and the book value of
equity between profit- and loss-reporting firms. The study also examines
how firms’ intangible intensity affects the value relevance of R&D

outlays between profit- and loss-reporting firms. Design/methodology/
approach: An empirical analysis based on Ohlson’s (1995) framework is
used. A total of 54,421 firm-year observations of Indian listed firms from
financial years 1992–2016 constitute the study sample. Findings: The
findings suggest that the difference in the value relevance of earnings

and the book value of equity between profit- and loss-reporting firms

relevant in profit-reporting and non-intangible intensive
firms, whereas book value of equity is more value relevant in
loss-reporting and intangible intensive firms. The results also
suggest that the difference in the incremental value relevance

of R&D information between profit- and loss-making firms
is higher in intangible intensive firms than in non-intangible
intensive firms. Practical implications: The findings of this study

can help managers, standard-setters and investors make
effective decisions. Originality/value: This study offers insights
into the impact of intangible intensity on the value relevance
of aggregated and disaggregated accounting information
between profit- and loss-making firms in institutional settings

where capitalization of R&D expenditures is allowed.

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