The Effect of International Financial Reporting Standards (IFRS) on the Relationship Between Accounting Information and Stock Prices on the Ghana Stock Exchange

Abstract

This study sought to find the ability of accounting information to explain stock price movement on the Ghana Stock Exchange (GSE) and the effect International Financial Reporting Standards (IFRS) in explaining stock price movements. Two multiple regression models were used to ascertain how accounting information was relevant in explaining stock prices as well as to test whether the adoption of International Financial Reporting Standards (IFRS)  has an effect on value relevance. Four single regression models was used to explain how accounting variables contribute to explaining stock price.  The study regressed the stock prices on accounting data as well as annual interest rate to determine their relationship. In general the study found that accounting information, specifically earnings, Price to earnings ratio and Return on Equity was relevant   in explaining stock price movements in both   in pre-adoption IFRS and post- adoption IFRS periods in Ghana. The study also found that the adoption of IFRS did not have any effect on the ability of accounting information to explain stock price movements.

Keywords: Accounting information, Value relevance, IFRS.