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The IUP Journal of Accounting Research and Audit Practices:
An Analytical Study on Integration of Financial and Non-Financial Information and Its Impact on Stock Market Measure
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After economic liberalization, there was increasing interest in Indian markets. Moreover, India has gradually moved to a knowledge-based, fast-changing, technology-intensive economy in which investments in human resources, information technology, research and development, and advertising have become essential in order to strengthen the firmís competitive position and ensure its future viability. In this scenario, firms feel a growing need to make investments in intangibles that in most cases are not reflected in the balance sheet but on which the future success of the company is based to a large extent, and therefore not only the importance of financial information but also non-financial information is becoming imperative. Hence, research on integration of financial as well as non-financial information is getting more and more significant and noteworthy as it has the capacity to influence the stock market measure. This study investigates the relative value relevance of the financial information and non-financial information of the companies included in BSE 100 index for the period 2003-2013. The study focuses on the incremental power of non-financial information and the combined effect of financial and non-financial information on share price. The various statistical tools used for detailed analysis reveal that non-financial variables do have a significant impact on the dependent variable, i.e., share price. The findings also reveal that when the financial and non-financial variables are taken together, they have a more dominant impact on share price and non-financial variables show incremental explanatory power than the financial variables.

 
 
 

Indian economy is gradually moving to a knowledge-based fast-changing, technology-intensive economy in which investments in human resources, information technology, research and development, and advertising have become essential in order to strengthen the firmsí competitive position and ensure their future viability. In this scenario, firms feel a growing need to make investments in intangibles that in most cases are not reflected in the balance sheet, but on which the future success of the company is based to a large extent.

In such a scenario, just the financial details of a company are not enough. Investors are looking for much more as the composition of savings is changing from bank deposits to shares and debentures. Indian capital markets have undergone some phenomenal changes which have led to the growth in the foreign institutional investors, mutual funds and increase in trading volumes emphasizing more disclosures of financial and non-financial information.

Because of the increased inclination towards stock market, it becomes important to know which information is of importance to the investors and considered relevant by them. Akerlof (1970) mentioned that information asymmetry (irregularities) might cause markets to disappear. Securities may be mispriced due to information problems and may have a negative impact on resource allocation. Hence, studying the value relevance of information provides helpful insights to stock market authorities and the various participants of the stock market. Not only this, with the changing economic scenario world over and more so in India, the importance of understanding the concept of value relevance of financial and non-financial information has greatly increased.

 
 
 

Economic liberalization ,knowledge-based, Fast-changing, Technology-intensive economy, Human resources, Information technology, Research and development, and Advertising.