Samithamby Senthilnathan

Doctor of Philosophy, (Finance)
Study Completed: 2009
College of Business


Thesis Title
The role of the most recent prior period's price in value relevance studies

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This thesis reveals that the ability of current accounting information to explain share prices should be evaluated in relation to the forward looking information that is already impounded in past prices, since past share prices are determined by investors’ forecasts of future information. New information is therefore informative only to the extent that it changes investors’ current beliefs about share values. When the importance of current earnings information is empirically re-evaluated by taking account of the information benchmark provided by past share prices, current earnings are found to be at best marginally value relevant, and have been almost completely anticipated by investors. New accounting information such as current earnings or goodwill amortization is therefore found to be only marginally useful to investors. The analysis further implies that share price changes, rather than the level of share prices, should be used to evaluate the value relevance of accounting information.

Associate Professor John Powell
Dr Jianguo Chen

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