Value Relevance and Stock Market Performance: Evidence from the Dar es Salaam Stock Exchange in Tanzania

Abstract

This study applied a longitudinal correlational design to evaluate 2010 - 2022 data for Dar es Salaam Stock Exchange (DSE)-listed firms in Tanzania to examine the relationship between value relevance and stock market performance. Specifically, it examined the influence on market capitalisation, market indices and trading volume. Out of 28 listed firms, a sample of 16 was selected based on data availability for the period of 2010 to 2022, with a threshold of 50% active listing IPOs and trading above 50% of the period under study, where, 7 are financial firms, 6 are manufacturing, and 3 from other sectors. Data were obtained from the DSE, the Bank of Tanzania, the National Bureau of Statistics, and audited annual reports. The one-step System GMM estimator was applied after conducting the Hansen and Arellano–Bond tests for validity and serial correlation. The results indicate persistence in market capitalisation, the index, and trade volume. The DY was positive and significant on market capitalisation, whereas the EPS and PER remained insignificant. EPS showed a weak correlation with market indices; PER and DY were insignificant, whereas trading volume was positively correlated with EPS and DY, and PER was insignificant. The joint Wald test and restriction results highlighted a significant relationship between value relevance and stock market performance. The study contributes to stock market performance literature by applying restrictions and Wald tests to examine multiple coefficient effects. The results highlight that regulators and policymakers need to enforce disclosure requirements and recommend mixed methods approaches for future studies.