Properties of accounting earnings associated with legal regime and the relative value-relevance of earnings, dividends and cash flows: evidence from American depositary receipts

Tony Kang

International Journal of Accounting, Auditing and Performance Evaluation, 2005, vol. 2, issue 1/2, 140-152

Abstract: Prior literature finds that the properties of accounting information are associated with the legal regime of a firm's country of domicile. Extending this line of research, this study investigates whether investors rely more on other valuation parameters (e.g., dividends and cash flows) when the quality of earnings is perceived to be low. Our evidence suggests that accounting earnings (dividends and cash flows) are relatively less (more) value-relevant for code (common) law country firms whose earnings are considered to be of lower (higher) quality. Overall, our results are consistent with the view that dividends and cash flows serve as substitutes for earnings for valuation purposes and that US investors' choice of valuation model largely depends on the quality of earnings.

Keywords: value-relevance; accounting earnings; legal regime; American depository receipts; dividends; cash flows; accounting information; valuation models. (search for similar items in EconPapers)
Date: 2005
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.inderscience.com/link.php?id=6896 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ids:ijaape:v:2:y:2005:i:1/2:p:140-152

Access Statistics for this article

More articles in International Journal of Accounting, Auditing and Performance Evaluation from Inderscience Enterprises Ltd
Bibliographic data for series maintained by Sarah Parker ().