The influence of the ongoing financial crisis on the usefulness of IFRS based financial statements in the Netherlands

Prior research regarding the value relevance of accounting information indicates that the value relevance of reported earnings decline and the value relevance of reported book values increase during financially unstable times. In this research the effects of the ongoing financial crisis in the European Union on the value relevance of accounting numbers are empirical tested. The purpose is to provide empirical evidence regarding the capability of IFRS to provide value relevant information during a crisis. The research consists of two sample periods, a pre-crisis period and an in-crisis period and is conducted in the Netherlands. The empirical results show that the value relevance of reported earnings decline during a crisis and the value relevance of reported book values increase during a crisis. The incremental value relevance of book values almost tripled during the financial crisis but did not fully replace the decline in value relevance of the reported earnings. In both periods reported losses seems more value relevant than reported profits.