Earnings, Book Value and Share Prices: Does Firm Size Condition Value Relevance? Evidence from Indonesia's Basic and Chemical Industry

Annisa Octaviandini; Nella Yantiana; Muhammad Fahmi; Sari Rusmita

doi:10.55681/economina.v5i10.4708

Authors

Annisa Octaviandini Universitas Tanjungpura, Pontianak, Indonesia
Nella Yantiana Universitas Tanjungpura, Pontianak, Indonesia
Muhammad Fahmi Universitas Tanjungpura, Pontianak, Indonesia
Sari Rusmita Universitas Tanjungpura, Pontianak, Indonesia

DOI:

https://doi.org/10.55681/economina.v5i10.4708

Keywords:

V alue Relevance, Earnings Per Share, Book Value, Share Price, Firm Size, Scale Effect

Abstract

This study examines whether earnings per share (EPS) and book value per share (BVPS) explain share prices of Indonesian basic and chemical firms, and whether firm size strengthens the value relevance of earnings. Drawing on the Ohlson valuation model and signalling theory, it analyses a balanced panel of 30 firms listed on the Indonesia Stock Exchange over 2021-2024 (120 firm-years). Chow, Hausman and Lagrange Multiplier tests select the fixed-effects model, which is estimated with firm-clustered standard errors and checked with a wild cluster bootstrap and four robustness tests. EPS is positively and robustly associated with share prices (β = 6.09, p = .003) and remains significant in log and scale-deflated models. BVPS is not positively related to prices within firms. Firm size appears to strengthen the price-earnings relation in the levels model (β = 2.08, p = .006), but the effect does not survive the wild bootstrap (p = .206), reverses in the log-price model and disappears after correcting for scale. Investors in this industry price earnings rather than book value, and apparent size moderation in price-level regressions largely reflects scale.

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