ranking from the highest to lowest explanatory power for the samples pooled over all years
and for the yearly average.
The mean yearly R2 are greater than the pooled firm-years for all countries except
Korea. Fitting the model for each year allows for yearly variation in the relation and results
in a better fit than pooled firm-years. Table 8 reveals considerable year to year variation in
the coefficients.
The following initial conclusions seem warranted. First, coefficients on book value
and earnings are not greatly different from those found for European and American
markets. Second, there is a high level of cross-country variation in explanatory power
of accounting earnings and book values for stock prices. The six Asian countries in
this study differ more than European and North American countries in prior studies.
Third, earlier in this article we predicted, based on accounting differences, that
accounting values in the Philippines would have high explanatory power for firm
value but low explanatory power in Taiwan. Both of these predictions are substantiated.
However, contrary to our predictions Korean accounting values have high
explanatory power. This appears anomalous given the reliance of accounting practice
on tax law in Korea.
ranking from the highest to lowest explanatory power for the samples pooled over all years
and for the yearly average.
The mean yearly R2 are greater than the pooled firm-years for all countries except
Korea. Fitting the model for each year allows for yearly variation in the relation and results
in a better fit than pooled firm-years. Table 8 reveals considerable year to year variation in
the coefficients.
The following initial conclusions seem warranted. First, coefficients on book value
and earnings are not greatly different from those found for European and American
markets. Second, there is a high level of cross-country variation in explanatory power
of accounting earnings and book values for stock prices. The six Asian countries in
this study differ more than European and North American countries in prior studies.
Third, earlier in this article we predicted, based on accounting differences, that
accounting values in the Philippines would have high explanatory power for firm
value but low explanatory power in Taiwan. Both of these predictions are substantiated.
However, contrary to our predictions Korean accounting values have high
explanatory power. This appears anomalous given the reliance of accounting practice
on tax law in Korea.
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