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1. Introduction
Decision-makers rely on financial accounting information to evaluate the stock prices of firms. One of the main objectives of financial reporting is to provide equity investors with information that can be used to estimate firm value. In fact, financial statements should generally provide useful information to decision-makers. Value relevance research is the empirical analysis of whether this goal is met (Beisland, 2009). Value relevance of accounting information is, thus, focused on modeling the relationship between traditional accounting information and a firm’s market value (Robu et al., 2016). Value relevance is, therefore, the statistical association between accounting numbers and the market value of equity (Beisland, 2009). Outa et al. (2017) highlight the importance of value relevance research by explaining that the financial statements prepared by firms provide investors and other decision-makers with valuable accounting information to enable them to make informed decisions. This is important particularly in relation to developing economies where there is a scarcity of capital and a high degree of investment risk.
Various studies examine the value relevance of accounting information (Dechow, 1994; Myers, 1977; Choi et al., 2006; Asthana and Chen, 2012), and empirical evidence shows that accounting information has value relevance. However, in the case of the Middle East and North Africa region (MENA), there seems to be a paucity of research in this regard. As an illustration, Desoky and Mousa (2014) argue that only a few studies examine value relevance in the context of Gulf countries (GCC).
Therefore, this paper contributes to the literature by offering a large-scale study, which examines empirically the value relevance of accounting information for a sample of nine MENA region countries over a span of 10 years. In addition, an objective of this paper is to also draw comparisons between GCC and non-GCC country firms as there may be distinct differences between the value relevance of accounting information across the two regions due to the accounting standards followed by firms across the regions.
According to the official IFRS foundation website, firms in Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, the UAE and Jordan report under IFRS. However, Egypt and Tunisia do not report under IFRS. Thus, the majority of countries in the MENA region reporting under IFRS are GCC countries, whereas the...