Relative strength of business groups and the value-relevance of earnings for group-affiliated companies

Jiafeng Xiang and Zhiyun Sheng

Finance Research Letters, 2024, vol. 63, issue C

Abstract: This paper investigates the value-relevance of group-affiliated companies using a sample of Chinese private listed companies. We find that the value-relevance of earnings for the affiliated companies is negatively related to the relative strength of the business groups, and a higher operating risk of the affiliated companies may weaken the negative relationship. Moreover, a stronger relative strength of the business groups may reduce the likelihood of the affiliated companies’ future stock price crashes. Overall, our results suggest that low value-relevance of earnings for group-affiliated companies may not be indicative of low accounting information quality.

Keywords: Value-relevance of earnings; Business group; Relative strength; Concentrated ownership (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:63:y:2024:i:c:s1544612324003507

DOI: 10.1016/j.frl.2024.105320

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