Administrative Expenses and Firm Value: Evidence from Chinese Stock Market

36 Pages Posted: 15 Jul 2020

See all articles by Qing Liang

Qing Liang

Chinese Academy of Finance and Development

Feng Guo

Central University of Finance and Economics (CUFE)

Guanglei Zhou

Central University of Finance and Economics (CUFE) - Chinese Academy of Finance and Development

Date Written: June 22, 2020

Abstract

Analyze the components of administrative expenses and find that some expenditure in administrative expenses, such as employee training expenses, employee education expenses, technology development expenses, etc., which have a long-term positive effect on improving the relationship between enterprises and the government or banks, enhancing employee satisfaction, improving corporate technology, and enhancing corporate competitiveness, so as to create future bene ts for the enterprise. Based on the empirical analysis, we prove that the previous administrative expenses are positively related to the current operating profit. Through data analysis and empirical research, it shows that: (1) administrative expenses are positively associated with future operating performance; (2) the capital market can partially recognize the future value creation ability of administrative expenditure so that the administrative expense future value has significantly positive pricing coefficient; (3) the capital market fails to fully recognize the future value created by administrative expenditure so that the highest portfolio can experience significantly positive future excess return.

Keywords: administrative expense, firm value, excess return

JEL Classification: M41, G12, G30

Suggested Citation

Liang, Qing and Guo, Feng and Zhou, Guanglei, Administrative Expenses and Firm Value: Evidence from Chinese Stock Market (June 22, 2020). Available at SSRN: https://ssrn.com/abstract=3632901 or http://dx.doi.org/10.2139/ssrn.3632901

Qing Liang

Chinese Academy of Finance and Development ( email )

39 South College Road
Beijing
China
18813191030 (Phone)

Feng Guo

Central University of Finance and Economics (CUFE) ( email )

39 South College Road
Haidian District
Beijing, Beijing 100081
China
+861062288675 (Phone)
+861062288779 (Fax)

Guanglei Zhou (Contact Author)

Central University of Finance and Economics (CUFE) - Chinese Academy of Finance and Development ( email )

39 South College Road
Beijing
China

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