The impact of intangibles on the value relevance of accounting information: Evidence from French companies

Abstract

Purpose: The paper aims to explore whether intangible items that recognised in financial statements are value relevant to investors in the French context, and whether these items affect the value relevance of accounting information. Design/methodology: The data has been collected from a sample of French listed companies over the nine year period of 2005 to 2013. Starting of Ohlson's (1995) model, the Correlation analysis and the Linear Multiple Regression has been applied. Findings: We find that intangibles and traditional accounting measures as a whole are value relevant. However, the amortization and impairment charges of intangibles and, cash flows do not affect the market values of French companies, unlike other variables, which affect positively and substantially the market values. Also goodwill and book values are more associated with market values than intangible assets and earnings respectively. Finally, we find that intangibles improve the value relevance of accounting information. Practical implications: French legislators must give more interest to intangibles, in order to enrich the content of financial statements and increase the pertinence of accounting information. Auditors must give more attention to intangibles' examination process, in order to certify the amounts related to them in financial statements, and hence enrich their reliability, what provides adequacy guarantees for investors to use them in decision making. Originality/value: The paper used recently available financial data, and proposed an improvement concerning the measure of incremental value relevance of intangible items.