| Summary: | 碩士 === 中原大學 === 會計研究所 === 89 === ABSTACT
Present study decomposes total earnings according to their geographical sources as earnings from domestic operations, earnings from Mainland China operations, and earnings from operations in overseas other than Mainland China. The theme of the study is to investigate differential information contents of domestic and foreign components of total earnings from firm valuation perspectives. The first research question concerns the association between changes in the domestic and foreign components of earnings with changes in the market value of the firm. Foreign earnings are hypothesized to be related to firm value stronger than the domestic counterparts. The second research question tests the existence of information contents of the components of earnings from domestic operations, from Mainland China operations, and from overseas operations other than Mainland China. The stronger association between foreign earnings components with firm value than the domestic counterparts is further explained via differential growth opportunities. The cumulative excess returns are regressed on the above-mentioned earnings components in order to study the hypothesized cross-sectional associations.
The empirical results are as follows:
1.Both foreign and domestic earnings changes are significantly positively associated with annual excess return measures, and the association for foreign earnings are significantly larger than that for domestic earnings after controlling percentage of export sales. For firms with large percentage of revenue generated from exports, there is no difference between the associations of foreign earnings and firm value and that of domestic earnings and firm value.
2.Earnings from domestic operations, from Mainland China operations, and from overseas other than Mainland China are all positively associated with annual excess return measures for low export sale percentage sub-sample. The decomposition into three geographical sources also enhances R2 significantly. Another salient result is that earnings response coefficient for earnings from Mainland China operations is higher than that of for earnings from domestic operations.
3.After adjusting effects of exchange rate on foreign earnings changes, the earnings response coefficient for foreign operations remains significantly larger than that of domestic operations. Using respective foreign and domestic sales growth rates as proxies for the foreign and domestic growth opportunities of the firm, the larger coefficient for foreign earnings cannot be explained by differential growth opportunities. Measurement errors and short period under investigation may contribute to the failure.
|
|---|
