Value relevance of price, earnings and book values in the Athens Stock Exchange

Purpose – This paper seeks to deal with the problem of the anomalous negative price‐earnings relation for firms listed in the Athens Stock Exchange (ASE). Design/methodology/approach – The simple earnings capitalization model is employed to investigate the association between price and earnings across profit and loss firms listed in the ASE. Findings – This study verifies a negative price‐earnings relation for those firms that report losses (loss firms) and a positive price‐earnings relation for those firms that report profits (profit firms). Practical implications – Regarding the usefulness of financial information to investors, the security price‐earnings relation is proved not to be homogeneous across firms that report losses and firms that report profits. Originality value – The paper provides evidence on the value relevance of publicly available information in a developing stock exchange which finally achieved its entrance to the world's developed markets.