The Usefulness of Earnings and Book Value for Equity Valuation in Emerging Capital Markets: Evidence From Listed Companies in the People's Republic of China

This paper examines the relative value relevance in equity valuation of two sets of accounting information of listed Chinese companies which issued the so-called B shares to foreign investors on the Chinese stock exchanges. These firms are required to prepare two sets of financial statements: one based on China's accounting regulations (domestic GAAPs) and the other based on International Accounting Standards (IASs). The study adopted the Ohlson (1995) model and used the Davidson-MacKinnon J-test to assess which one of these two competing sets of accounting information is more closely associated with the share prices. The results showed that earnings and book value reported based on IASs have greater information content than those based on domestic GAAPs. The results of yearly regression analysis generally suggested that the explanatory power of these earnings and book values for share prices increased over time.     

Usefulness of Value Added and Abnormal Economic Economic Earnings: An Empirical Examination

This paper investigates the usefulness of two alternative measures of performance: value added and abnormal economic earnings. Using earnings as the benchmark, firm value analysis, levels analysis, and changes analysis were performed to evaluate their explanatory power. Results show that value added is a statistically significant variable; its explanatory power is higher than that of earnings. Abnormal economic earnings, however, are not a significant variable.     

A stochastic model of professional accountant turnover

High turnover rates have tended to characterize the public accounting profession. Probabilistic estimates that generate duration models have been often used in engineering and to a lesser extent in business fields. This study suggests a stochastic model and methodology to be used in professional accountants' turnover analysis. The model is simple, can help evaluate numerous policy implications and allows for future turnover prediction. A set of published data is utilized to illustrate the use of the model. This illustration describes turnover patterns for accounting staff broken down by admission year and sex. The stochastic model also predicts the number of accountants that will quit in 5 yr.     

Change in Inventory and Firm Valuation

This study examines the effect of the informativeness of change in inventory on firm valuation. A firm's change in inventory is informative if its percentage change in cost of goods sold is positively and significantly associated with its lag one percentage of production added to inventory (a measure of change in inventory). Sample firms are divided into two groups: firms with informative change in inventory, and other firms. Analyses then are performed to examine the association between stock price and earnings. Results consistently show that the association is higher for firms with informative change in inventory. Thus, knowledge on the informativeness of change in inventory is useful for firm valuation.