Value Relevance of Accounting Information, Firm Size, and Firm Leverage on Stock Price: With Special Reference to Listed Food, Beverage & Tobacco Companies and Consumer Services Companies in Sri Lanka.

Abstract

Relevant, reliable, and accurate accounting information is essential for assessing financial conditions and business performance, aiding decision-makers in making informed choices. However, the number of studies about the value relevance of accounting information based on the Sri Lankan context is limited. Accordingly, this study aims to explore the value relevance of accounting information, specifically focusing on earnings and net assets value that represent the accounting information concerning stock prices while controlling for firm size and firm leverage within both listed consumer service companies and food, beverage, and tobacco companies in Sri Lanka from 2017 - 2022. All the companies in the population were selected as the sample based on the data availability. The study used descriptive statistics and regression analysis to identify the impact between the selected variables. The regression analysis outcomes indicate that accounting information such as net assets value and firm size exert a significant positive influence, whereas earnings have an insignificant impact on stock price. Further, financial leverage demonstrates a significant negative impact on stock price, and the industrial effect significantly impacts the stock price. These findings will aid in the decision-making of managers, prospective and existing investors, and legislators in creating policies and guidelines that enhance the accuracy and applicability of accounting information.