Investment Growth and the Relation between Equity Value, Earnings, and Equity Book Value

• 成果类型: Article
• 署名作者: Hao, Shengquan; Jin, Qinglu; Zhang, Guochang
• 署名单位: Shanghai Jiao Tong University; Shanghai University of Finance & Economics; Hong Kong University of Science & Technology
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/accr.00000028
• 发表日期: 2011
• 页码: 605-635
• 关键词: Valuation; determinants

摘要

Using Zhang (2000) as the theoretical basis, we predict and empirically test the effect of investment growth on the relation between equity value and accounting variables. We find that (1) growth increases the slope in the value-earnings relation for high-profitability firms (consistent with growth having positive NPV),buthas an insignificant or negative effect on the slope for lower-profitability firms (consistent with growth having non-positive NPV); (2) given earnings, growth increases the (positive) slope of the relation between equity value and equity book value for low-profitability firms, but reduces this slope and causes equity value to decrease with book value for high-profitability firms; and (3) given profitability (ROE), equity value uniformly increases with book value, and growth increases the slope of this relation. We also examine the valuation impact of past investment activities that arises from accounting conservatism. We find that the earnings coefficient is greater in the years following faster investment increases (which cause earnings to be more conservatively stated)