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Regional heterogeneity among non-operating earnings quality, stock returns, and firm value in biotech industry

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  • Joe-Ming Lee

Abstract

This paper analyses regional heterogeneity under the discretionary measures of non-operating earnings quality and stock returns on firm value in Taiwan's biotech industry during 2008-2015. An econometric framework based on panel smooth transition regression models is employed in a non-linear panel data model. The results show that biotech firms near the bottom threshold for operating income have low-quality non-operating earnings and those near the upper threshold demonstrate the opposite. Investors who exclusively focus on stock returns are thus likely to miss important information about the quality of earnings.

Suggested Citation

  • Joe-Ming Lee, 2019. "Regional heterogeneity among non-operating earnings quality, stock returns, and firm value in biotech industry," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 65(1), pages 10-20.
    • Handle: RePEc:caa:jnlage:v:65:y:2019:i:1:id:24-2018-agricecon
    DOI: 10.17221/24/2018-AGRICECON
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    References listed on IDEAS

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    1. Hansen, Bruce E., 1999. "Threshold effects in non-dynamic panels: Estimation, testing, and inference," Journal of Econometrics, Elsevier, vol. 93(2), pages 345-368, December.
    2. Graham, John R. & Harvey, Campbell R. & Rajgopal, Shiva, 2005. "The economic implications of corporate financial reporting," Journal of Accounting and Economics, Elsevier, vol. 40(1-3), pages 3-73, December.
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