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Note: tα1 is the t-statistic for α1; t2 is the t-statistic for β2. The statistical significance for tα1 and t2 is at 5% level. Pi,t is price per share (market value) of equity for firm i at the end of period t; Ei,t is the annualized earnings per share for firm i in period t; Bi,t is book value per share for firm i at the end of period t. Following Bowen (1981), Burgstahler and Dichev (1997) and Bao and Bao (1998), the variables are normalized by beginning book value per share.

The market value of a firm can be considered a function of both earnings and book value. A firm has the option to either continue its business at present or adapt its resources to alternative uses. Table 5 contains estimates of the coefficients for the linear equation that is relating Pit / Bit-1 to Eit / Bit-1 and Bit / Bit-1 (Equation [3]). In Table 5, the coefficients on both earnings and book value are significant at 5% level for all the years under study. While both earnings and book values are associated with equity values individually in the empirical results above, they are more powerful in explaining value when they are combined.

The average adjusted R2 is higher for the regressions than that of the model in Table 3 and Table 4. At the same time, what we should pay attention to is that although the coefficients of earnings tend to become as big as those of book value when it is moved to more recent years, the average coefficient and significance of book value is higher than those of earnings. It supports the argument that book value plays a more important role in the equity value of a firm than earnings.

Table 5 Market value of Chinese firms as function of earnings and book value between 2001-6-30 and 2008-12-31

Note: tα2 is the t-statistic for α2; t3 is the t-statistic for β3; t4 is the t-statistic for β4. The statistical significance for tα2, t3 and t4 is at 5% level. Pi,t is price per share (market value) of equity for firm i at the end of period t; Ei,t is the annualized earnings per share for firm i in period t; Bi,t is book value per share for firm i at the end of period t. Following Bowen (1981), Burgstahler and Dichev (1997) and Bao and Bao (1998), the variables are normalized by beginning book value per share.

Table 6 reports estimates of the coefficients for the piece-wise form which is relating Pit / Bit-1 to Eit / Bit-1after controlling for firm success (high earnings firms) (Equation [4]). Table 7 contains estimates of the coefficients for the piece-wise form which is relating Pit / Bit-1 to Bit-1 / Eitafter controlling for firm success (high earnings firms) (Equation [5]). As mentioned earlier, the domains of Eit / Bit-1(Table 6) and Bit-1 / Eit(Table 7) are divided into three groups with equal numbers of firms under study.

In Table 6, for example, the groups were identified in 2001-6-30 as follows: the firms with the ratio of Eit / Bit-1less than 0.201 (Cutoff 1) to the unsuccessful or low earnings firms (L), which is excluded from the regressions as the base case; the firms with the ratio of Eit / Bit-1greater than 0.201 (Cutoff 1) but less than 0.441 (Cut off 2) to the middle of the road firms (M); and the firms 本论文由英语论文网提供整理，提供论文代写，英语论文代写，代写论文，代写英语论文，代写留学生论文，代写英文论文，留学生论文代写相关核心关键词搜索。