First study to distinguish between incremental and relative information content (value relevance)

What is it about?

We elucidated the distinction between incremental and relative information content, proposed a statistical test for relative information content that we now call “value relevance”, and applied our test to provide value relevance evidence for net income, net sales, and operating cash flows.

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Why is it important?

This pioneering study contributed to accounting research by advancing understandings of, tests for, and evidence regarding the value relevance (horse race) comparisons that we now routinely employ.