THE VALUE RELEVANCE OF EARNINGS IN A TRANSITION
     ECONOMY: EVIDENCE FROM ROMANIAN STOCK MARKET


        Lavinia Minodora Takacs, Babeş-Bolyai University of Cluj-Napoca, Romania

ABSTRACT: The paper examines the value relevance of accounting information in Romanian
capital market between 2005 and 2010. Value relevance can be interpreted as the usefulness
of accounting data for decision making process of investors and usually its existence is given
by a positive correlation between market and book values. The paper main focus is the
variation of value relevance over the 6 years period and the influence Romania’s adhesion to
EU and consequently IFRS implementation had on it. Additionally issues like transition
process, accounting reforms and conservatism of financial reporting are taken into
consideration as potential explanatory factors for the variation of this fundamental quality of
accounting.

Key words: value relevance, transition economy, accounting earnings, equity valuation

JEL codes: C23; M41