Abstract
This study investigates the relationship between value creation as described by the traditional cost-based accounting convention and value as perceived by the stock market. In general, previous research using data from a variety of countries has documented inconsistent results and widely fluctuating regression parameters when evaluating such associations. There appears to be some confusion within the research community concerning the nature of the results obtained. The departure point of this thesis is the idea that value and value creation of a company can be captured from three conceptually different but related perspectives. The value concepts considered are economic, accounting and market value. A theoretical link between these concepts is initially proposed in the study. In an attempt to shed some light on common sources of the instability observed in the associations studied, a number of firm characteristics, changes in the economic climate, and changes in the accounting practice are identified and explicitly evaluated. It is shown that disclosed accounting earnings provide information regarding both a firm’s value creation during a specific period, and a firm’s ability to generate future value. It is also shown that certain factors are particularly important to control for in order to obtain a clearer and a more stable association. This study has intradisciplinary implications, as well as implications for investors, providers of accounting information and standard setting bodies