| 英文摘要 |
This study investigates whether Taiwan’s stock market precisely prices accrual component of earnings and nonfinancial indicators. If accrual-based and non-financial indicators anomalies co-exist and they represent different forms of market anomalies respectively, we further investigate whether they can be combined into a joint strategy to exploit both anomalies to earn larger abnormal returns than those associated the individual anomalies. Sloan (1996) indicates that stock market misprices accrual component of earnings in U.S. stock market. However, due to different accounting standards, the measurement of accruals and the returns implications of accrual are both potentially different between U.S and Taiwan. We hereby raise the question that whether there is also accrual anomaly in Taiwan stock market. Because of the decline in the informativeness of financial statements for security returns (Collins et al., 1997; Lev and Zarowin, 1999), disclosure issues related to non-financial indicators have grown in importance in recent years. The increased emphasis on the disclosure of non-financial indicators raises the question of whether stock market precisely prices non- financial indicators. In an efficient market, the stock prices reflect fully non-financial indicators for future earnings. Hence, there should be no association between non-financial indicators and future return. However, an extensive literature has developed challenging assumption of market efficiency for financial statements (Sloan, 1996; Bernard and Thomas, 1990). Meanwhile, many firms also devote intensive marketing efforts to promote many nonfinancial indicators. It raises the question whether the stock market under or over react to non-financial indicators. The main findings that emerge from this study are as follows. First, with respect to accrual anomaly, the empirical results show that the persistence of current earnings performance is decreasing in the magnitude of the accrual component of arnings. The stock market fails to appreciate the fact that accrual component of earnings is less persistent than cash flow component. Consequently, firms with relatively high(low) levels of accruals result in negative (positive) future abnormal stock returns. Second, with respect to market efficiency for non-financial indicators, we combined patents and trademarks as a proxy for non-financial indicators. The empirical results show that the stock market overstates the contribution of nonfinancial indicators for future earnings. Therefore, the trading strategy taking a long position in the stocks of firms reporting low non-financial indicators and a short position in the stock of firms reporting high non-financial indicators generates positive abnormal returns. Finally, with respect to the joint strategy exploiting two anomalies, the accrual anomaly and the non-financial indicators anomaly appear to capture different mispricing phenomenon. Thus, the joint trading strategy exploiting both the accrual anomaly and non-financial indicators anomaly significantly increases the magnitude of abnormal returns than those based on individual trading strategy. Our study makes two contributions to the extant literatures. First, we find that accrual anomaly also exists in Taiwan’s stock market. Second, we contribute to the literature on exploring the relation between stock prices and nonfinancial indicators. The empirical results show that the stock market overstates the value of trademark and patent. To the extent such abnormal returns imply that there are costs associated with the limited disclosure of information on patent and trademark (i.e., quality or potential benefit of patent and trademark), we believe that our findings can potentially strengthen standard setting body during their deliberations on standardizing or enhancing the disclosure of non-financial indicators. |
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