LEVELS OF EARNINGS IN THE RETURNEARNINGS RELATION – THE VALUE RELEVANCE OF EVIDENCE FROM SLOVAKIA
LEVELS OF EARNINGS IN THE RETURNEARNINGS RELATION – THE VALUE RELEVANCE OF EVIDENCE FROM SLOVAKIA

Summary/Abstract: Research background: The research on various form of earnings and earnings management has been in growing interest of researchers and practitioners in recent years. Previous studies provide various views on the explanatory power of earnings changes or earnings levels for variations of stock returns, as well as on the effects of the time-series behaviour of earnings on the value relevance of both earnings variables. Purpose of the article: The goal of the presented study is to compare the value relevance of various forms of level of earnings with the return-earnings relations of earnings changes. We studied levels of earnings in its various forms in Slovak companies in years 2018 and 2019. Methods: We applied methods of descriptive statistics on different earnings level according to the provided literature review. Pearson's correlation coefficient and the one-way ANOVA were used to examine the relationship between the selected indicators. Based on the provided calculations four hypothesis were tested and findings showed. Findings & Value added: The results prove that there is a statistically significant difference between the level of earnings EAT and region, size and sector of the company. Also, the analysis of relationships between total assets of the companies and their level of earnings showed the moderate correlation, and over the years, these results did not change. The results provide a different understanding on the role of earnings levels in business decisions. The paper points out the valuation role of earnings levels in the return-earnings relations. The results of this study can be further used in the creation of the earnings management model in companies.

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