The Impact of the COVID-19 Pandemic on the Value Relevance of Accounting Information: The Case of Polish Listed Banks
DOI:
https://doi.org/10.15678/krem.18742Keywords:
value relevance, COVID-19, bank, earnings, book values, cash flowAbstract
Objective: So far, the research focusing on the assessment of the impact of economic crises on value relevance in banks mainly concerned the global financial crisis, while other crises such as the pandemic were not comprehensively analysed in this regard. The aim of the article was to analyse the impact of COVID-19 pandemic, considered an economic crisis, on the value relevance of banks. The value relevance of earnings, book values, and cash flows was taken into consideration in the research.
Research Design & Methods: Value relevance models with share price as an endogenous variable and accounting variables as exogenous ones were estimated. The impact of the COVID-19 pandemic was captured by using variables’ interactions. Panel data models with fixed effects were employed. The sample consisted of Polish listed banks. The analysis period was 2017–2024, semi-annual data were used.
Findings: Generally, positive value relevance was found for earnings and deposits, but not for other book values (equity and loans). The impact of COVID-19 pandemic on the value relevance of book values was significantly negative, while it was not significant for earnings. Such results were partially consistent with the hypotheses developed. Value relevance of operating cash flows was not considered due to the multicollinearity issue.
Implications / Recommendations: The paper provides insight into the drivers of banks’ market values and their changes during economic crises from the investor’s perspective. Such knowledge could be valuable from the perspective of both investors and bank management.
Contribution: The impact of COVID-19 pandemic on the value relevance of earnings and book values in banks has not been analysed yet. Moreover, the semi-annual data was used, while previous research on value relevance in banks was mostly based on annual or quarterly data.
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