Value Relevance Of The Comprehensive Income Of Brazilian Banks

Abstract

This study makes an assessment of the value relevance of comprehensive income (CI), other comprehensive  income (OCI) and the different departments of Brazilian banks listed in the B3 ( Brasil, Bolsa, Balcão – the Brazilian financial market and Stock Exchange). A comparison is made between this relevance and the net profit margin for the market value and abnormal returns. The data obtained from 21 trading banks were employed for this purpose during the period 2002-2024. The results showed that the net profit remains the key performance  metric for the capital markets in Brazil, even though the comprehensive income was a relevant factor both for the market value and the abnormal returns. Moreover, the aggregated value of the other comprehensive income lacked relevance,   despite the fact that the constituent parts of the fair value adjustments  to the financial instruments that were classified as  FCVOI ( fair value  through other comprehensive income) had proved to be relevant in explaining the behavior of the market value and return on assets. The adjustments to the external Investments, which were offset by the corresponding hedging, showed residual relevance for the market value. This study fills a gap in the literature on the question of  value relevance, with regard to specialist studies on the banking market and seeks to provide an insight into the growth of capital markets. It is hoped it will make a practical contribution to the work of managers, regulators, investors and analysts by providing evidence on how the market is able to assimilate accounting information systems, as well as by  drawing attention to the limitations of the use of comprehensive income as a large-scale metric of net return.