Development of accounting in Poland: Market efficiency and the value relevance of reported earnings

This paper outlines the evolution of the information environment surrounding the Warsaw Stock Exchange in Poland. Like other transition economies, Poland needed to develop accounting regulations to support privatization. We trace changes in financial reporting regulation from 1994, through the adoption of IFRS and corporate governance codes, to the crisis of 2007–2008. The effect of these developments is then evaluated empirically by testing the relevance of earnings of listed corporations from 1997 to 2008 to corporate value. We show that the stock exchange was weak-form efficient during this period and estimate regressions for value relevance of earnings to corporate value. We find positive evidence of such relevance but no improvement in the strength of the relationship over time.