Interdependance of Accounting Data and Stock Prices on the Capital Market: “pliva” Case Study

The issue of stock market usefulness is, in fact, related to the specific disclosure environment prevailing in a country. Croatian capital market is underdeveloped and has limited significance in the financial system. This paper deals with the usefulness of financial statement information and it is organized in the following way: in the first part we give a brief overview of capital markets in transition economies, history and regulation of the stock market in Croatia, with particular focus on the Zagreb Stock Exchange. Then, we enumerate the data collection procedure and describe the methodology used to test our hypothesis. We examine the information content of annual earnings announcements through its impact on the stock price movement in the case of Pliva’s ordinary shares, listed on the Quotation I of the Zagreb Stock Exchange. Finally, at the end of the paper we discuss the results and drew conclusions. The evidence suggests that annual earnings announcements made by Pliva convey new and material information to stock market investors, which is reflected in significant changes in stock return.