Impact of Financial Crises on the Value Relevance of Earnings and Book Value: 1994 and 2001 Crises in Turkey

Abstract

This study examines the change in the value relevance of earnings and book value between years 1992-2007 for non-financial firms listed in Istanbul Stock Exchange. During this period Turkey experienced the economic crises of 1994 and 2001, each with different characteristics. The previous literature shows that both under firm level and macro level economic pressure, the value relevance of book value increase whereas results on earnings tire inconclusive. The same financial crises can influence value relevance differently in separate countries depending on country specific factors. Similarly it can he expected that different economic crises can affect the value relevance differently in the same country depending on the type or severity of the financial crisis. The results show that the impacts of the 2001 and 1994 crises on the value relevance of earnings are different, and this may be due to the different characteristics of these two crises.