A SYSTEMATIC REVIEW OF VALUE RELEVANCE STUDY IN ASIAN COUNTRIES

Abstract

ABSTRACT
Although value relevance studies began three decades ago in United States, the topic remains important for further exploration in countries outside United States particularly in Asia, due to its positive impact on the development of accounting science and global financial statement users, such as accounting standard-setters, capital market regulators, and investors. The research question that arises then is how to enhance the value relevance of accounting information through adoption of new accounting standard, improved measurement of firm fundamental performance, and financial reporting disclosure. The novelty of this paper lies in its systematic review of several themes in the value relevance literature, focusing on Asian countries over the past ten years (2013-2023). This review provides insights into the future research agenda, particularly for developing countries in Asia. The research method employed is a systematic review, which consists of planning, conducting, and reporting the review of 44 papers from journals indexed in the Scopus database. The first findings reveal a declining trend in the value relevance of accounting information, with new accounting standards like IFRS not fully addressing the issue. Empirical studies in China, Indonesia, and India show mixed results, while in many Middle Eastern countries, including Saudi Arabia, Kuwait, and Qatar, the decline in value relevance of earnings is more pronounced than that of book value. The second findings show that intangible investments, such as research and development capitalization and human resource expertise can enhance the value relevance of earnings and book value in China and India. Although these investments are recorded as expenses, they signal future profitability and potential returns for the investor. The third finding indicates that the disclosure of non-financial information, such as sustainability reporting awards and environmental performance ratings has the potential to enhance the value relevance of accounting information in Indonesia. The conclusion highlights the growing significance of intangible investments in China and India, alongside the importance of environmental and sustainability factors in Indonesia regarding value relevance. Consequently, enhancing the measurement and valuation of intangible assets, as well as environmental and sustainability metrics, is essential for improving the value relevance of accounting information.

Keywords: Value Relevance, Accounting Information, Asian Countries, Systematic Review.