Value relevance of price, earnings and book values in the Athens Stock Exchange

Abstract

Purpose This paper seeks to deal with the problem of the anomalous negative price‐earnings relation for firms listed in the Athens Stock Exchange (ASE). Design/methodology/approach The simple earnings capitalization model is employed to investigate the association between price and earnings across profit and loss firms listed in the ASE. Findings This study verifies a negative price‐earnings relation for those firms that report losses (loss firms) and a positive price‐earnings relation for those firms that report profits (profit firms). Practical implications Regarding the usefulness of financial information to investors, the security price‐earnings relation is proved not to be homogeneous across firms that report losses and firms that report profits. Originality value The paper provides evidence on the value relevance of publicly available information in a developing stock exchange which finally achieved its entrance to the world's developed markets.

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