Administrative Expenses and Firm Value: Evidence from Chinese Stock Market
36 Pages Posted: 15 Jul 2020
Date Written: June 22, 2020
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 benets 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: Suggested Citation