Ghanaian cityscape with stock chart overlay

Decoding Value: How Accounting Data Shapes Stock Prices in Emerging Markets

Reese Marlowe in Business & Economy August 2025 • 4 min read.

"Unlock the secrets of emerging market investments: Discover how financial statements from Ghana's stock exchange drive investor decisions and market trends."

For investors navigating the exciting, yet often unpredictable terrain of emerging markets, understanding the factors that drive stock prices is paramount. While global economic trends and political stability certainly play a role, the significance of local financial information, specifically accounting data, cannot be overstated.

Accounting information serves as a critical compass, guiding investors as they weigh different investment opportunities. By dissecting financial statements, investors gain insights into a company's profitability, asset values, and overall financial health. This information, in turn, shapes their expectations and influences their buy or sell decisions, ultimately impacting stock prices.

This article delves into the fascinating relationship between accounting data and stock prices within the context of an emerging market: Ghana. By examining the Ghana Stock Exchange (GSE), we uncover how key accounting metrics like earnings and book value influence investor behavior and market trends. This analysis provides valuable lessons for anyone interested in understanding the dynamics of emerging market investments.

The Power of Numbers: Earnings and Book Value Unveiled

Ghanaian cityscape with stock chart overlay

At the heart of this analysis lies two fundamental accounting concepts: earnings and book value. Earnings, representing a company's profit over a specific period, offer a snapshot of its current financial performance. Book value, on the other hand, reflects the net asset value of a company, providing a measure of its intrinsic worth.

To investigate the impact of these metrics on the GSE, the study employed the Ohlson (1995) Price model, a widely recognized framework for assessing the value relevance of accounting information. This model essentially examines the extent to which earnings and book value explain variations in stock prices.

Earnings: A key indicator of a company's profitability, reflecting its financial performance over a specific period.
Book Value: Represents the net asset value of a company, offering a measure of its intrinsic worth based on its assets and liabilities.
Ohlson (1995) Price Model: A framework used to assess how well earnings and book value explain stock price variations.

The study's findings revealed a clear and compelling link between accounting information and stock prices on the GSE. Both earnings and book value demonstrated a positive and significant relationship with stock prices, indicating that investors indeed rely on these metrics when making investment decisions. Further analysis suggested that earnings played a more prominent role in explaining stock price variations compared to book value, highlighting the importance of profitability in the eyes of Ghanaian investors.

Navigating the Future: Key Takeaways for Investors and Policymakers

This exploration into the Ghana Stock Exchange offers several valuable lessons for investors and policymakers alike. For investors venturing into emerging markets, it reinforces the importance of conducting thorough financial analysis, paying close attention to key accounting metrics like earnings and book value. Understanding how these metrics influence local investor sentiment can lead to more informed and profitable investment decisions. For policymakers and standard-setters, this analysis underscores the need to maintain and enhance the quality of financial reporting. By promoting transparency and ensuring the reliability of accounting information, they can foster greater investor confidence and contribute to the sustainable growth of emerging capital markets.

About this Article -

This article was crafted using a human-AI hybrid and collaborative approach. AI assisted our team with initial drafting, research insights, identifying key questions, and image generation. Our human editors guided topic selection, defined the angle, structured the content, ensured factual accuracy and relevance, refined the tone, and conducted thorough editing to deliver helpful, high-quality information.See our About page for more information.

This article is based on research published under:

DOI-LINK: 10.1108/jaoc-07-2017-0064, Alternate LINK

Title: Value Relevance Of Accounting Information: An Emerging Country Perspective

Subject: Organizational Behavior and Human Resource Management

Journal: Journal of Accounting & Organizational Change

Publisher: Emerald

Authors: Bismark Badu, Kingsley Opoku Appiah

Published: 2018-11-08

Everything You Need To Know

What specific accounting data is most important in influencing stock prices within the Ghana Stock Exchange (GSE)?

The analysis of the Ghana Stock Exchange (GSE) highlights two key accounting metrics: earnings and book value. Earnings, representing a company's profit, reflect its financial performance. Book value, the net asset value, indicates its intrinsic worth. The study reveals both metrics positively and significantly relate to stock prices, with earnings showing a more prominent role in explaining price variations compared to book value. This suggests Ghanaian investors prioritize a company's profitability when making investment decisions on the GSE.

How can an understanding of earnings and book value impact investment decisions in the context of emerging markets?

Understanding earnings and book value is crucial for investors in emerging markets like Ghana. Earnings, reflecting a company's profitability, provide a snapshot of its current financial performance. Book value, the net asset value, provides a measure of its intrinsic worth. By analyzing these metrics, investors can gain insights into a company's financial health, guiding their decisions to buy, sell, or hold shares. This thorough financial analysis, focusing on earnings and book value, can lead to more informed and profitable investment decisions, especially within the dynamic environment of emerging markets.

What is the role of the Ohlson (1995) Price model in analyzing the relationship between accounting data and stock prices?

The Ohlson (1995) Price model serves as a framework to assess the value relevance of accounting information, specifically how earnings and book value explain changes in stock prices. This model was used in the analysis of the Ghana Stock Exchange (GSE). It helps determine the extent to which these accounting metrics influence stock price variations, thereby revealing how investors on the GSE use earnings and book value to make investment decisions. The model's application helps validate the significance of these metrics in shaping investor behavior within the emerging market.

What are the practical implications for policymakers based on the findings related to accounting data and the Ghana Stock Exchange (GSE)?

For policymakers and standard-setters, the findings highlight the need to maintain and enhance the quality of financial reporting. Promoting transparency and ensuring the reliability of accounting information, like earnings and book value, can foster greater investor confidence. By ensuring dependable financial data, policymakers can support the sustainable growth of emerging capital markets, such as the Ghana Stock Exchange (GSE). High-quality financial reporting is crucial for attracting investment and promoting market stability in the context of emerging economies.

How do earnings and book value differ, and why are both important in assessing a company's financial health on the Ghana Stock Exchange (GSE)?

Earnings represent a company's profit over a specific period, offering a snapshot of its financial performance, highlighting how well the company is doing currently. Book value, on the other hand, reflects the net asset value of a company, providing a measure of its intrinsic worth based on its assets and liabilities, essentially showing what the company owns minus what it owes. While both earnings and book value are crucial, earnings seem to play a more prominent role in influencing stock prices on the Ghana Stock Exchange (GSE), indicating that Ghanaian investors place significant importance on a company's profitability. Assessing both metrics together offers a more comprehensive view of a company's financial health, aiding in making informed investment decisions.