Abstract (EN)

This study investigates the extent to which three key summary accounting income figures,namely operating income (OPI), net income (NI) and comprehensive income (CI), providevalue-relevant information to investors in major EU capital markets. Using a large sampleover the pre-IAS-compliance period (1992-2004), we find that all these three figures arestatistically associated with share returns in any of the countries under analysis althoughdisparities in the degree of ‘usefulness’ appear across samples. Our main results are thenthreefold. We first provide evidence that CI is less value-relevant than both NI and OPI in allthe sample countries. Second, our results show that aggregate OCI is value-relevant andgenerally provides incremental price-relevant information beyond NI. This finding is ratherdifferent from the existing US literature that suggests OCI is usually not value-relevantespecially when not separately disclosed in financial statements. Finally, considering earlyadoption firms, we find that increased transparency on reporting OCI as required by the UKFRS3 and US SFAS130 standards may have warranted a stronger statistical associationbetween share returns and CI. This last finding therefore strongly supports the ideologyunderlying the IASB/FASB ‘Performance Reporting’ joint project, and provides evidencesupporting Beaver’s (1981) psychology-based financial reporting theory.