Can Fundamental Analysis Support Shareholder Value In A Transitional Market? Perspectives From Egypt

Abstract

This study examines the informativeness of fundamental financial information to three levels of shareholder value. In general, the results show that the fundamental financial information is quite informative to shareholders using the MB ratio as a measure of shareholder value. According to the sensitivity analysis, (1) the balance sheet items are not quite informative, (2) the income statement items are consistently informative to shareholders at the three classes, and (3) the financial ratios, as a form of co-integrated financial information, are quite informative to the high and low shareholder value classes. The results regarding the fundamental analysis indicate that (a) in the three levels of MB firms, investors are concerned with the short-term horizon, (b) in the low MB firms, the investors are concerned with the long-term horizon, (c) in the high and low MB firms, the operating and total expenses are regarded as a capital investment, (d) in the high MB firms, the trend is to finance operations using equity rather than debt financing, (e) profitability affects low MB firms only rather than high and medium firms, (f) in the high and medium MB firms, investors do not regard the elements related to firms operations, (g) in the low MB firms, investors are concerned with the effects of capital structure on firms value although the results show that dividends have a reverse effect on firms market value.