This study examines the value relevance of Indian Generally Accepted Accounting Principles (GAAPs) after introducing profound financial reporting and firm governance reforms in India. Specifically, it scrutinises the association between share prices and both earnings and the book value of equity using 33,643 firm year observations. It employed robust regressions to estimate year- wise regression over the sample period that ranges from 2002 to 2015. The results reveal that accounting information proxied by earnings and book values of equity is value relevant over the sample period. The study also estimated the trend of value relevance of accounting information over the sample period. It was found that there is an insignificant liner decline in the value relevance of accounting information in India over the sample period. This problem needs to be addressed by implementing reforms in Indian GAAPs to increase the trend of value relevance of accounting information. The increase in value relevance will boost investor’s confidence and increase the level of foreign and domestic capital inflows in Indian capital markets.
Value relevance, accounting information, GAAPs, IFRS, reforms