Financial Crisis and Corporate Value Creation: Testing Information Content Theory

Abstract Information is the most expensive element of the capital market that investors can rely on to make the most out of profitable market opportunities. The information content of accounting figures from the standpoint of accounting standards refers to the characteristics that the information presented in the financial statements can help to make a decision.This study tries to study the information content theory of accounting figures in financial crisis. In this study, the financial crisis is measured by three criteria: operating loss, negative operating cash flow and cumulative loss. The sample consisted of 167 companies listed in Tehran Stock Exchange during 2008 to 2017. The results show that all three variables of operating loss, negative operating cash flow and accumulated loss have significant effect on the relationship between earnings per share and book value per share and stock price. This is consistent with information content theory. In other words, variables of operating loss have negative operating cash flow and accumulated loss of information content and improve the usefulness of the decision.