Value relevance of provisions and contingent liabilities disclosed on the reference form of Brazilian companies

Abstract

The present study intends to examine the value relevance of provisions and contingent liabilities disclosed in the Reference Form, according to the expenditure chance attributed by the company for each process (remote, possible or probable). The study's hypotheses were established that there would be value relevance in the provisions and contingent liabilities disclosed by the company in the Reference Form. The sample includes companies listed on B3, the Brazilian stock exchange, within the Non-Cyclic Consumption, Oil, Gas and Biofuels, Communications and Public Utilities sectors from 2010 to 2020, which resulted in a total of 75 companies and 735 observations. In line with the objective and the proposed hypothesis testing, the applied statistical technique is the analysis of panel data, applying a longitudinal linear regression model, based on the adapted relevance model of Ohlson (1995). The most important conclusions were that there is no value relevance regarding provisions and contingent liabilities classified in the Reference Form. Among the contributions of this study, the rejection of the hypotheses regarding the value relevance of provisions and contingent liabilities recorded in the Reference Form stands out, confirming previous literature, especially from the perspective that the information contained in unaudited disclosures of companies, such as the Reference Form, may be perceived differently by the investor compared to those audited.