Financial Ratio and Stock Return: Empirical Evidence from Taiwanese Public-Listed Companies in Traditional Industries

• Main Authors: Meng-Che Chiang, 蔣孟哲
• Other Authors: 陳俊合
• Format: Others
• Language: zh-TW
• Published: 2017
• Online Access: http://ndltd.ncl.edu.tw/handle/36802524474139061915

碩士 === 國立中興大學 === 會計學研究所 === 105 === Traditional industry played the significant role in the economic development of Taiwan. The leading position of Taiwan industries has been replaced by high-tech industry as technology advances and economic development in recent years. However, companies of Traditional industries have used new technology and knowledge in transformation of enterprise in recent years. Some of them even become high value-added enterprises and generate stable profit or stock returns. These companies also become ideal targets of investors. In this study, I used listed companies of Traditional industries in Taiwan to discuss whether financial variables in relation to financial statement are significantly relevant to stock returns in hopes of helping investors make investment decisions. This paper uses financial ratios in fundamental analysis of Lev and Thiagarajan (1993) and Regulations Governing Information to be Published in Annual Reports of Public Companies of Taiwan Financial Supervisory Commission. These selected 11 variables include rate of change (ROC) of inventory turnover, ROC of accounts receivable turnover, capital expenditure, research and development (R&D) expenditure, ROC of gross margin, selling and administrative expense, allowance of doubtful debts, ROC of debt ratio, times interest earned, ROC of total assets turnover and ROC of return on assets. The empirical results show that ROC of inventory turnover (-), ROC of gross margin (+), allowance of doubtful debts (-), ROC of debt ratio (-), ROC of total assets turnover (+) and ROC of return on assets (+) are significantly relevant to stock returns of current year. Except for ROC of inventory turnover and allowance of doubtful debts, the directions of other variables are consistent with the prediction. There is only one variable, capital expenditure, significantly relevant to stock returns of next year. The results also show that capital expenditure (+), research and development (R&D) expenditure (+), ROC of gross margin (-), selling and administrative expense (-), allowance of doubtful debts (+), ROC of debt ratio (-) and ROC of total assets turnover (-) are significantly relevant to stock returns of last year. Therefore, empirical results show that financial ratios are lagging indicators, a finding that financial ratios are more relevant to stock returns of current and last yeat and that ROC of gross margin, allowance of doubtful debts, ROC of debt ratio and ROC of total assets turnover are significantly relevant to stock returns of both current year and last year.