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An International Meeting of American Accounting
Association
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The Impacts of Life Cycle on the Value Relevance of Financial Performance Measures: Evidence from Taiwan |
Yu - Lin Chang
National Yunlin University of Science & Technology Taiwan
Chung - Jen Fu
National Yunlin University of Science & Technology
Abstract: From prior studies, the researchers suggest that firms in different life cycle stages have different characteristics that affect the value relevance of financial performance measures. This study applies Ohlson's valuation model (1995) to examine the relationship between equity market value and the various financial performance measures in each life cycle stage. We use cross-sectional data on six measures from 629 firms of Taiwan electronic industry over eleven years and yield a total of 2,754 firm-year observations. We find R&D expense is value-relevant in the start up stage; cash flows from financing and operating income are value-relevant in the growth stage; cash flows from operation and returns on equity are better indicators in the mature stage. This supports that GAAP successfully provides relevant and substantial information that is useful to investors outside of the public equity market (Hand 2005)