OCI VALUE RELEVANCE IN CONTINENTAL EUROPE: AN EXAMINATION OF THE ADOPTION OF IAS 1 REVISED

The present study examines the value relevance of Other Comprehensive Income (OCI) in Continental Europe. Through an extensive data set covering firms in 19 countries from 1995 to 2010, we provide a comprehensive discussion of OCI value relevance over time, focusing in particular on the introduction of IAS/IFRS in 2005 and IAS 1 Revised in 2009. We discuss how the implementation of these standards has affected the extent to which the market takes OCI into account, finding an increase in OCI value relevance after the introduction of IAS/IFRS in 2005 and IAS 1 Revised in 2009. We also test what the drivers of these results we obtain are, in terms of differences between IAS and national GAAP and importance of the equity market. Our results are strengthened by a sensitivity test which examines these effects in companies with high / low OCI variability and by several other robustness tests.