Decision usefulness of accounting information in Finland and Sweden – Comparison between main stock market and alternative stock market

Abstract

This study explores the effect of stock market on the decision usefulness of accounting information in Finland and Sweden. The main goal of the study is to explore if investors consider the accounting information of companies listed on main stock market (Nasdaq Nordic) more useful in their decision making than the accounting information of companies listed on alternative stock market (Nasdaq First North). Due to the lower regulation in First North, investors face a higher level of information risk when investing in First North companies. The information risk may, in turn, reduce the decision usefulness of accounting information. As the differences in the regulation between Nasdaq Nordic main market and Nasdaq First North are partly due to the mandatory appliance of IFRS in Nasdaq Nordic main market, the study also aims to find out if investors consider the accounting information of companies preparing IFRS financial statements more decision useful than accounting information of companies not preparing IFRS financial statements.

The study is conducted as a statistical value relevance study by testing whether the stock market and IFRS affect the value relevance of earnings or book value of equity. A modified Ohlson model is applied and the main research method is multiple regression analysis. The sample consists of 365 Finnish and Swedish listed companies. The data is collected from the 2016 financial statements of the companies, Thomson Reuters Datastream and Nasdaq Nordic websites.

The main finding of the study is that the decision usefulness of accounting information is not higher for companies listed on main stock market than for companies listed on alternative stock market. Similarly, the decision usefulness of accounting information is not found to be higher for companies preparing IFRS financial statements than for companies not preparing IFRS financial statements. For profitable firms, the stock market or IFRS are not found to have any effect on the decision usefulness of accounting information. For loss firms, the stock market or IFRS do not affect the decision usefulness of earnings, while they negatively affect the decision usefulness of book value of equity, and thus also the overall decision usefulness of accounting information. That is, for loss firms, the decision usefulness of book value of equity is lower for companies listed on main stock market than for companies listed on alternative stock market, and respectively, lower for companies preparing IFRS financial statements than for companies not preparing IFRS financial statements.