The relationships between geopolitical risk, the value relevance of accounting information and auditor opinion: evidence from a developing market

Purpose This study aims to examine the relationship between geopolitical risk (GPR) and the value relevance (VR) of accounting information (AI) under different types of auditor opinion (AO). Design/methodology/approach This study uses a sample of nonfinancial firms listed on EGX100 during the period 2014–2023. Whereas GPR and AO data have been collected manually from annual reports and governance reports, stock prices are collected from EGX Archives available at the Egyptian Company for Information Dissemination. The study depends on the t-test, Pearson correlation, and OLS, 2SLS and GMM regressions to examine the authors’ hypotheses. Findings The results revealed a negative effect of GPR on the VR of AI. However, this negative effect may vary across accounting measures, depending on the auditor’s opinion. The VR of book value (BVS) declined during higher GPR periods, which was clearly visible with qualified auditor opinion. However, GPR increased the value relevance of EPS, which was clearly visible with unqualified auditor opinion, indicating that EPS might be perceived as a more reliable measure in uncertain environments, especially with the existence of a supportive auditor opinion. Originality/value This study contributes to literature by examining relationships between geopolitical risk, the VR of AI and auditor opinion, especially in developing markets, such as the Egyptian stock market. This study has practical implications, which can guide emerging market firms facing challenges during GPR periods to improve market perceptions about the firm.