Journal Archive

korean management review - Vol. 50 , No. 2

[ Article ]
korean management review - Vol. 49, No. 6, pp.1351-1380
Abbreviation: kmr
ISSN: 1226-1874 (Print)
Print publication date 31 Dec 2020
Received 04 May 2020 Revised 06 Jul 2020 Accepted 22 Jul 2020

The Impact of Investor Sentiment on Value Relevance of Accounting Information
Jeong-han Baek ; Young-min Kwak
(First Author) Assistant Professor of Business Administration at Dongguk University(Gyeongju) (
(Corresponding Author) Associate Professor of Accounting at Ulsan University (

투자자 심리가 회계정보의 가치관련성에 미치는 영향

This is an open access article distributed under the terms of the Creative Commons Attribution License 4.0, which permits unrestricted, distribution, and reproduction in any medium, provided the original work is properly cited.


This study provide empirical evidence that the differential impact of investor sentiment on value relevance of accounting components, in particular book value and net incomes which have different economic implication. It takes into account the possibility that the tendency of investors to rely on certain information will give greater weights to information which is consistent with their sentiment. Unlike prior accounting studies which measured investor sentiment index at the market-wide level, this study measured investor sentiment at the individual firm level, considering that investor sentiment varies with each firms, even at the same period.

Using a cross-section of companies listed KOSPI stock market spanning 2011 - 2017, we find that net income is more value relevant in high sentiment firms relative to low sentiment firms, while book value is more relevant in low sentiment firms relative to high sentiment firms. In low sentiment, these results are consistent with investors placing a greater weight upon book value, which shows accounting information of current valuation. In high sentiment, investors placing a greater weight upon net income, which shows accounting signal of firms’ future performance.

Keywords: Investor sentiment, noise trader, accounting information, value relevance

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∙ The author Jeong-han Baek is an assistant professor of Business administration at Dongguk University(Gyeongju). He graduated from Pusan National University(PNU) with a degree in business administration and obtained a master’s and doctorate degrees from the PNU. The main areas of interest in research include value relevance, earnings management, and goodwill accounting.

∙ The author Young-min Kwak is an associate professor of Accounting at Ulsan University. He graduated from Pusan National University(PNU) with a degree in department of Economics and obtained a master’s and doctorate degrees from the PNU. The main areas of interest in research include corporate governance, value relevance, earnings management, and corporate social responsibility.