Differential Value Relevance of Accounting Information on Investors’ Decisions: Evidence from Sri Lankan Commercial Banks

Abstract

This research investigates the impact of differential value relevance of accounting information on investors' decisions in Sri Lankan commercial banks during noncrisis (2013-2018) and crisis (2018-2022) periods. Key metrics such as Earnings per Share (EPS), Return on Equity (ROE), Earning Yield (EY), Net Asset Value Per Share (NAVPS), and Return on Assets (ROA) were analyzed, with Market Value per Share (MVPS) as the proxy for investors' decisions. Data from ten licensed commercial banks listed on the Colombo Stock Exchange from 2013 to 2022 was analyzed using descriptive statistics, correlation analysis, and panel regression. The study found a strong positive correlation between NAVPS and MVPS during non-crisis periods, while EY was negatively associated with MVPS. In the crisis period, EY had a negative link to MVPS, and EPS showed a positive relationship. These findings provide valuable insights for stakeholders in Sri Lanka's commercial banking sector.