Value Relevance of European High- and Low-Technology Companies' Financial Statements

Sammanfattning: During the 1990s the increased importance of intangible assets caused concern among practitioners and academics that financial statements were losing their value relevance, i.e. the relation between a firms’ financial statement information and its market value, especially for high-technology firms which were deemed likely to be intangible-intensive. Research conducted on the US market largely show that financial statements were losing their relevance to investors during the build-up of the dot-com bubble in the 1990s but that this trend reversed to an increase for both high- and low-technology firms after the bursting of the bubble. This study extends the research on financial statements’ relevance for investors to the underexplored European markets to determine whether there is a difference in value relevance between high- and low-technology firms in the period from the bursting of the dot-com bubble through 2014 in Europe by performing a regression analysis on quantitative financial data. Our results show that high-technology firms have more value relevant financial statements than have low-technology firms, that the value relevance of low-technology firms’ financial statements has decreased over time and that this decrease is greater for low-technology firms than it is for high-technology firms for which the value relevance has not changed significantly over time.