| Summary: | 碩士 === 國立臺北大學 === 會計學系 === 98 === Recent Accounting Researches indicate that value relevance of earnings has deteriorated over time, and it has been replaced by increasing value relevance of book value. Has earnings lost its relevance? Francis and Schipper（1999）state “financial information is value relevant if it contains the variables used in a valuation model or assists in predicting those variables”. According to this statement, we investigate the relevance of earnings from two points of view for samples of Taiwan Stock Exchange from 1980 through 2007. First, we examine the relationship between current earnings and stock prices based on the study of Collins, Maydew and Weiss（1997）. Second, we investigate the relationship between current earnings and future operating cash flows using the regression model of Kim and Kross（2005）. Besides, we investigated the relevance of earnings in three periods: (1) the period of preliminary setting accounting standards（from 1980 to 1999）, (2) the period of positively renewing accounting standards（from 1980 to 2004）, (3) the period of fair value accounting（from 2005 to 2007）. Furthermore, we classified our samples into two subgroups, one with positive earnings and the other with negative earnings, in order to examine whether the firms with positive or negative earnings have different impact on the relevance of earnings.
For the relationship between earnings and price, our findings include the follwing:
(1) Value relevance of earnings and book values has increased significantly over the period from 1980 to 2007. The incremental relevance of earnings has increased significantly, while the incremental relevance of book values significantly decreased.
(2) The trend of incremental relevance of earning and book values in the period of preliminary setting accounting standards is the same as in our total sample period.
(3) For the results of subgroups, we find the trends of incremental relevance of earning and book values are different between positive and negative earnings group. However, for the positive earnigs group, the trends of incremental relevance of earning and book values are similar with total samples.
For the relationship between current earnings and future operating cash flows, our findings include the follwing:
(1) Earnings significantly assist in predicting future operating cash flows.
(2) The ability of earings to predict future operating cash flows has insignificantly increased over time. On the contrary, the ability of current operating has insignificantly decreased over time.
(3) For the ability of earnings to predict future operating cash flows, we find it significantly decreased in the period of preliminary setting accounting standards, insignificantly increased in the period of positively renewing accounting standards, and then insignificantly decreased in the period of fair value accounting. For the results of subgroups, both positive and negative earnings significantly assist in predicting future operating cash flows, and their abilities to predict future operating cash flows have insignificantly decreased over time.
|
|---|
