The Relationship between Overvalued Equity, Overinvestment and Future Performance

• Main Authors: CHU,YU-SHAN, 朱佑繕
• Other Authors: Li,Chi-hua
• Format: Others
• Language: zh-TW
• Published: 2017
• Online Access: http://ndltd.ncl.edu.tw/handle/vb6r48

碩士 === 輔仁大學 === 會計學系碩士班 === 105 === Since 2000, there have been many frauds in the world, and Enron and Procomp frauds in the United States, and Taiwan, induces investors to suspect that many fine companies end up in ruins, and explore the reasons for its occurrence. The concept of agency costs of overvalued equity was proposed by Jensen (2005) explained that because of personal performance and maintaining stock price, managers can carry out various earnings management behaviors, example include decreasing discretionary spending (e.g. R&D, advertising, maintenance, etc.) and early recognition of income. This study uses Richardson (2006)'s investment level model to test whether the overvalued equity companies tend to overinvest and test the relationship between overvalued equity and future performance. The empirical results show that overvalued equity companies tend to overinvest and the future performance of the overvalued equity company are worse than other companies.