Value Relevance of Earnings and Book Value: Evidence from Listed Companies in India

Abstract

Aims: This study aims to examine the value relevance of accounting information by analysing the extent to which earnings per share (EPS) and book value per share (BVPS) explain stock price variations of selected companies listed in the Nifty-50 index in India. Study Design: The study adopts an empirical research design using cross-sectional regression and pooled panel data analysis based on the Ohlson (1995) price valuation model. Place and Duration of Study: The study focuses on Nifty-50 indexed companies from 2016-2017 to 2024-2025, which corresponds to the post-adoption period of Indian Accounting Standards (Ind AS). Methodology: The sample consists of 24 non-financial companies selected from the Nifty-50 index after excluding financial sector firms and companies with missing data. A total of 216 firm-year observations were analysed. The study employs Ordinary Least Squares (OLS) regression to estimate three models in order to examine the individual and combined explanatory power of EPS and BVPS in determining stock prices. The explanatory power of the models is evaluated using adjusted R2 values. Results: The empirical findings reveal that both EPS and BVPS have a statistically significant relationship with stock prices. The results indicate that BVPS demonstrates relatively stronger and more consistent explanatory power across most of the years, while EPS exhibits a higher marginal impact on stock price when statistically significant. Furthermore, the combined regression model including both EPS and BVPS provides greater explanatory power compared to the individual models. Conclusion: The findings suggest that accounting information continues to play a meaningful role in stock price determination in the Indian capital market. This research contributes to the value relevance literature as it presents recent evidence from the Indian capital market, and provides some insights for investors, regulators and standard-setters regarding the continued importance of traditional accounting metrics in equity valuation processes.