Investigating the value relevance of accounting information using the CART method: a study in the Tehran Stock Exchange

Subject Areas :

Norallah Khodadadi ¹ , Mehrdad Ghanbari ² , Babak Jamshidinavid ³ , Javad Masoudi ⁴

1 - Department of Accounting, Kermanshah Branch, Islamic Azad University, Kermanshah, Iran
2 - Assistant professor, Department of Accounting, Kermanshah Branch, Islamic Azad University, Kermanshah, Iran
3 - Assistant professor, Department of Accounting, Kermanshah Branch, Islamic Azad University, Kermanshah, Iran
4 - Assistant professor, Department of Accounting, Kermanshah Branch, Islamic Azad University, Kermanshah, Iran

Received: 2024-08-03 Accepted : 2024-09-30 Published : 2024-11-06

Keywords: Value relevance, classification and regression trees, intangible assets, growth opportunities, alternative performance measures.,

Abstract :

The credibility of financial reports depends on the relevance of accounting information. In order for the financial information to be relevant, there must be a meaningful relationship between the accounting items and the value of the company. The purpose of this research is to determine the importance of the relevance of the value of accounting variables in predicting stock prices in the Tehran Stock Exchange. For this purpose, 93 companies were investigated for the period 2001 to 2020. In this research, a non-parametric method called Classification and Regression Trees (CART) was used to estimate the relevance of value, which automatically includes non-linear relationships and interactions between variables. The results show that the variables of net incomet, dividends declured, book value and operating cash have the highest percentage of relevance in determining the stock price, respectively. Also, the findings show that the variables of revenue, total assets, type of industry, cash equivalents and short-term investments are in the next priority in terms of relevance. Also, the results indicate that the percentage of relevance of the variables of research and development cost and other comprehensive income is equal to zero. The findings of this research provide perspectives on accounting information that may be useful for better reflecting information for investors when evaluating a company and providing potential insight regarding stock valuatio.

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