1. the period under study. Hence, the study

1.    Methodology

This section enlightens the
methodology of the study, that is the research design, the population of the
study, the sample size and sampling technique and the sources and methods of
data collection used. Similarly, the techniques for statistical analysis of
data are also described in this part.

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The Research Design

This research scrutinizes the presence
of statistical association between accounting information and the share price
of listed banks in Mauritius, South Africa and Botswana mainly to determine the
value relevance of book value of equity, earnings, and dividend. To test the value
relevance of the accounting information, the study relies on the financial
statements and the factbooks published by the stock exchanges.

The population of the study include 4
banks listed on the Stock Exchange of Mauritius (SEM), the 5 banks listed on
the Johannesburg Stock Exchange (JSE) and the 4 banks listed on the Botswana
Stock Exchange (BSE) for a period of ten years (10) ranging from 2007-2017.



South Africa


ABC Banking corporation LTD

Standard Bank Group

Investec Bank

Mauritius Commercial Bank

Sasfin Holdings Limited

Barclays Bank

State Bank of Mauritius

Barclays Africa Group

Standard Chartered Bank

NedBank Group

First National Bank


Absa Bank


The main criteria for sample selection
is that it must have been listed on the stock exchange for a period not later
than 2007 so as to ensure that the financial reports and share prices are
accessible for the establishment of a continuous trend of data for the period
under study.  Hence, the study sampled ….
banks. This study does not examine companies of other sectors than the banking

Source of data and variables

This study employs data extracted
from the annual reports and accounts of the sampled banks for the study, that
is, secondary data, similar to previous studies for instance, Che (2007) and
Babalola (2012). The data of major concern includes the component of accounting
information which are obtainable from the financial statements of the listed
banks and the Factbooks published by  the
stock exchanges of Mauritius, South Africa and Botswana .

The dependent variable for this study
is the market price of the share of the sampled banks. The book value per share,
the earnings per share and the dividend per share form part of the independent

Modelling BVS, EPS and DPS as a function of price


methodology employed for this investigation derives from association studies.
This technique assesses the value relevance of accounting information through
the statistical association between financial indicators and the firm’s market
value presuming the financial markets are efficient. Ohlson (1995) postulated
that the market value of a firm is a linear function of its earnings and its
net situation. Association studies uses regression analysis involving
regressing the profitability value for a given share in a market on the
accounting numbers for which that value relevance should be appreciated. This study
used the price model which investigates the impact of accounting information on
the market price of shares based on the concepts of Barth et al (1998) and Filip
and Raffournier (2010).


regression model is generally expressed as follows:

MVit = ?0 + ?1 X1 +
?2 X2 + …
+ ?n Xn +


= the market value of the company;

X =
different financial indicators selected

is the random error


basic model derived within the Ohlson (1995) framework is

Pit = ?0 + ?1
BVSit + ?2 EPSit + ?it 

Ohlson model is modified to accommodate the effect of dividend as follows;

= ?0 + ?1 BVSit + ?2 EPSit
+ ?3 DPSit + ?it                (1)



= Share price of company i at the end of year t ;

= Earnings per share of company i during period t ;

=Book value per share for company i during period t ;

= Dividend per share of company i during period t ;

?it   = random error;


equation (1) expresses the price per share as a function of their accounting
values and the relative earnings. The model allows the assessment of the joint
explanatory power of earnings, book values and dividend. To investigate the
explanatory power of each of the variables separately equation 1 is broken down
into the following equations whereby the share prices are regressed separately
on book values, earnings per share, and dividend per share.


= ?0 + ?1 BVSit + ?it     (2)

= ?0 + ?2 EPSit + ?it      (3)

= ?0 + ?3 DPSit + ?it    (4)


The first
(equation 2) presents the price only as a function of the accounting value of
the share BVS, the second (equation 3) interprets the price as a function of
the earnings per share while the third one (equation 4) interprets the price as
a function of the dividends per share.


correlation between the accounting variables and the market prices is assessed
by the regression coefficient R2. The latter clarifies the extent of
the association between the share prices and the accounting variables. It depicts
the value content of the accounting numbers and their ability to reflect the
data transmitted on the financial market which is incorporated in the company’s
market value. The higher R2, the greater the value relevance of the
accounting variables and the better indicator of the market value of the firm. The
accounting information is regarded as value relevant if the obtained adjusted R2
is significantly different from zero, as in similar studies (Beisland, 2008 and
Barth, Beaver & Landsman, 2001).