A Study of Value Relevance of Earnings and Book Values ---Taking Scale Effect into Consideration
Date Issued
2007
Date
2007
Author(s)
LIN, YEN-YU
Abstract
This study investigates the change in the value-relevance of earnings and book values in equity valuation from 1986 to 2005 in Taiwan. This study consists of two major empirical analyses.he first one is based on the valuation model proposed by Collins, Maydew, and Weiss (1997) to study whether earnings and book values are value-relevant. e find that the combined value-relevance of earnings and book value has increased over the last 20 years. Besides, the incremental value- relevance of earning has increased over time while there is no evidence to show whether the incremental value- relevance of book value has increased or not. he second empirical analysis, which is based on the valuation model proposed by Brown, Lo, and Lys (1999) deals with the scale problem. There are two methods in this analysis. First, according to the method of coefficients of variation, the combined value-relevance of earnings and book value has increased over time. The relevance of earning and the relevance of book value have increased over time.econd, according to the price-deflated method, there is no evidence to show whether the combined value-relevance of earnings and book value has increased over time.
Subjects
value relevance
book values
earnings
coefficients of variation model
price-deflated method.
Type
thesis
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