The Relation of Firm Market Values with Book Values and Residual Accounting Earnings in Six Asian Countries

35 Pages Posted: 18 Jul 1998

See all articles by Roger C. Graham

Roger C. Graham

Oregon State University

Raymond D. King

University of Oregon - Department of Accounting

Date Written: April 1998

Abstract

We examine the relation between stock prices and accounting numbers across six Asian countries: Indonesia, South Korea, Malaysia, the Philippines, Taiwan, and Thailand. Accounting practice in the six countries differs in faithfulness to clean surplus accounting and in bias (conservatism). We address two questions. First, are there systematic differences across the countries in the value relevance of accounting? Second, are there systematic differences in the incremental and relative information content of book values and abnormal (residual) earnings per share (REPS) across the countries? We also examine whether differences are related to accounting differences. We find differences across the six countries in the value relevance of accounting numbers. Explanatory power for Taiwan and Malaysia is relatively low while that for Korea and the Philippines is relatively high. Second, we find book value to have high explanatory power in the Philippines and Korea but little in Taiwan. REPS had less explanatory power than book value (and less than EPS) in all six countries.

JEL Classification: M41, G12

Suggested Citation

Graham, Roger C. and King, Raymond D., The Relation of Firm Market Values with Book Values and Residual Accounting Earnings in Six Asian Countries (April 1998). Available at SSRN: https://ssrn.com/abstract=107489 or http://dx.doi.org/10.2139/ssrn.107489

Roger C. Graham

Oregon State University ( email )

424 Austen Hall
Corvallis, OR 97331
United States
541-737-4028 (Phone)
541-737-4890 (Fax)

Raymond D. King (Contact Author)

University of Oregon - Department of Accounting ( email )

Lundquist College of Business
1208 University of Oregon
Eugene, OR 97403
United States

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