Value Relevance of Information Disclosure: A Case Study of Companies Listed in LQ45 Index of Indonesian Stock Exchange in Period 2016 - 2017

1Kiki Khoifin and Dej-anan Bungkilo

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Abstract:

Challenges will be always exist and undeniable on stockexchange. Providing high-quality information disclosure and transparency is one of the challenges, which required byinvestors for assessment purposes and better economic decision making. For the sake of boosting the information disclosure and transparency issue among Publicly Listed Companies (PLCs), Indonesia has released act of directors of Jakarta Stock Exchange No. Kep-306/BEJ/07-2004 and act of Financial Service Authority or Otoritas Jasa Keuangan (OJK) No.KEP-134/BL/2006. The regulations have been significantly contributed in improving the information disclosure and transparency, which was revealed by the report of Asian Development Bank in 2015. The report showed the increase in scores from 13.43 points in 2012 to 17.50 points in 2015, or a 30.31% improvement. However, the score is still lower than its neighboring countries such as Malaysia (18.86 points), Thailand (20.07 points), and Singapore (19.06 points). Nevertheless, query has been rising from researchers as to whether information disclosurehas value relevance for investors. In responding to the question, understanding about the value relevance is necessary to be delivered. Value relevance is the ability of accounting numbers to summarize the information underlying the stock price, hence the value relevance is designated by a statistical association between financial information and price or return. Therefore, this study aims to investigate whether information disclosure consists of financial statements and voluntary disclosure of the companies that were listed in LQ45 index on IDX in period 2016-2017 have value relevance. The most significant result found that financial statements represented by BVPS and EPS have value relevance. This study has implications and isuseful for readers due to as the information preparation. The listed companies will gain knowledge of what extent, what type, and the amount information that should be disclosed in order to be successful in attracting investors to source for funds on the stock exchange. The finding is beneficial for future literature regarding accounting information and contribution to investors in weighting which information is the most concerned for assessment.

Keywords:

Value Relevance, Financial Statements, Voluntary Disclosure, Stock Return.

Paper Details
Month2
Year2020
Volume24
IssueIssue 3
Pages899-909