The Value Relevance of Accounting Information in Thailand Around the 1997 Decline in the Value of the Baht

This study examines the value relevance of financial accounting in Thailand prior to and during the decline in the value of the Baht in July 1997. The study examines the association between security prices from the Stock Exchange of Thailand and accounting book values and earnings from first quarter 1992 through third quarter 1997. Our results show that Thai earnings and book values are positively and significantly related to security prices although to a lessor extent than for United States and British firms. Thai book values and earnings each have incremental information content relative to the other. We find that the value relevance of book values in Thailand are increasing significantly over time, particularly after the decline in the value of the Baht in July 1997. However, the number of Thai firms reporting losses increased in the second and third quarters of 1997. Thus, our evidence that the value-relevance of Thai book values increased is consistent with evidence from US firms that value relevance shifts from earnings to book values when earnings are negative. We find no evidence, however, of change in the value relevance of earnings.