Abstract:
This paper investigates the value relevance
of accounting information in Sri Lanka. The study uses
book value per share (BVPS), earrings per share (EPS)
and operating cash flow per share (OCFPS) as the
independent variables and market value per share
(MVPS) as the dependent variable. Sample of the study
includes 310 firm-year observations from 5 largest
industry sectors. Ohlson’s (1995) price model and an
alternative model with operating cash flow per share
are employed. Study finds that BVPS, EPS and OCFPS
all have a positive and statistically significant
relationship with market value per share. This finding
proves that the accounting information is value relevant
in Sri Lanka. Comparison of Ohlson model
with the alternative model developed in this study
reveals that both models are value relevant to Sri
Lankan data. However, the alternative model with
operating cash flow per share is more informative than
the original Ohlson’s (1995) price model in Sri Lanka.
