Copyright © 2017 Omar Camara. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. International Journal of Accounting and Economics Studies, 5 (2) (2017) 183-188 International Journal of Accounting and Economics Studies Website: www.sciencepubco.com/index.php/IJAES doi: 10.14419/ijaes.v5i2.8531 Research paper Salient accounting value drivers and equity returns : Evidence from US industries Omar Camara * Department of Accounting and Finance, College of Business Administration (COBA), Prince Mohammad Bin Fahd University, Kingdom of Saudi Arabia *Corresponding author E-mail: ocamara@pmu.edu.sa Abstract Past literatures suggest the presence of ubiquitous disquiet among corporate financial managers, financial analysts and portfolio man- agers that changes in certain accounting variable's results in changes in stock prices, irrespective of whether future cash flow's sub- sume these changes in salient accounting variables. Using an empirical rational inquiry, this paper attempts to test whether there is any relationship between salient accounting variables and equity returns for five major US industries (Manufacturing, Services, Wholesale, Constructions and Retail) from the period 1996 to 2015, and as a result, may contribute to accretion or loss in stockhold- ers’ wealth. To account for divergent industry-specific revenue generating process and the existing fluidity in industry-specific appli- cation of accounting standards, this study thus disaggregates sample data by industry. The industry approach implies that the effect of salient accounting variables on equity prices may be described as a conflation of industry-specific characteristics and capital market synergies. Consistent with this notion, this study finds that salient accounting variables which are used to measure operating perfor- mance, growth opportunities, investment management and profitability have the significant impact on equity returns. However, and most importantly, the study finds that the impact of the salient accounting variables varies from one industry to another. As such, this study is particularly useful for equity market participants in the identification of industry related, market-relevant accounting varia- bles, which may be used to guide future financial policies. Keywords: Capital Markets; Financial Accounting; Equity Returns; Us Industries; Panel Data. 1. Introduction Corporate managers’ ability to affect stock prices depends on the efficiency level of the capital markets. Both efficient market hy- pothesis (EMH) and the alternative hypothesis of profit-fixated market participants assumed that only unanticipated reported earn- ings or major corporate events may have the impact on equity prices. These propositions accord credence to technical analysts and skepticism towards the efforts of fundamental analysts. How- ever, in this paper, both signaling and disclosure theories are em- braced, given the fact that financial statements are manifestations of both theories. Signaling theory is the concept that one party credibly conveys some information about itself to another party, while disclosure shares the same interpretation, except that signal- ing under certain circumstances may be quite obscured. Thus, in this paper, the relationships between salient accounting variables and equity returns are examined from a purely-neutral empirical perspective, without making presumptions about efficient market argument or lack thereof. Specifically, this study uses certain key variables from financial statements that in prior literature are be- lieved to have influence on firms’ equity value. The salient ac- counting variables are drawn from operating, investing and financ- ing components of firms’ statements of financial condition. It is expected that appropriate policy orientations in these three areas may not only increase profitability and growth, but it may also increase shareholder wealth through an increase in equity prices. In addition, the industry-approach in this paper is expected to make the contribution to the literature in identifying the account- ing value drivers of share prices within the context of industry- specific characteristics such as divergent revenue recognition mechanisms, tangibility and growth opportunities. In other words, the importance of a specific accounting variable may depend on the structure within the industry, for example, manufacturing and construction industries are relatively highly capital intensive than other industries. Similarly, industries differ in their earning's gen- erating process, particularly for manufacturing and construction industries, where a percentage-of- completion- method of earnings recognition is preferred. The aforementioned industry-specific concerns render it necessary to disaggregate data by industry in order to examine which accounting variables are crucial for re- spective industries in relation to equity price mutation. The find- ings of this study may facilitate corporate financial managers in identifying and optimizing accounting value drivers, shareholders in recognizing accounting value drivers of their investments and portfolio managers in their diversification efforts. The rest of the paper is organized as follows: section 2 reviews literature related to accounting factors that influence equity prices. The data generating process and methodology are presented in section 3. Section 4 discusses the findings of the empirical tests, and section 5 concludes the paper. 2. Literature Financial accounting data has a function of facilitating investors’ risk assessments. Liu and Liu (2007) defined value-relevance as “