The relationship between competitive advantage and the value relevance of accounting information Online publication date: Thu, 21-Jun-2018
by Sang-Lyul Ryu; Jayoun Won
International Journal of Trade and Global Markets (IJTGM), Vol. 11, No. 1/2, 2018
Abstract: This study examines the relationship between competitive advantage and the value relevance of accounting information. The advantage that a firm has over its competitors can be defined as its relative efficiency in transforming the performance of key success factors into the firm's profitability. We classify firm-year observations into lifecycle stages and measure the efficiency using data envelopment analysis (DEA) in each of the different lifecycle stages. Our results indicate that the efficiency has a positive relationship with the stock price of a firm and decreases (or increases) the value relevance of book value per share (BPS) (or earnings per share (EPS)). The current study captures a firm's competitive advantage by a single efficiency score and reveals that the efficiency has a positive impact on firm value.
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