The valuation impact of assets elements in korean stock markets

Nội dung text: The valuation impact of assets elements in korean stock markets

1. THE VALUATION IMPACT OF ASSETS ELEMENTS IN KOREAN STOCK MARKETS Gee-Jung Kwon*1 ABSTRACT: This study investigates the valuation impact of asset elements on firm value in listed Korean stock markets during the period of 2000-2015. This paper extends conventional studies on firm valuation by including asset elements in an Ohlson (1995) model. Analysis results show that every asset element such as current assets, noncurrent assets, quick current assets, inventory assets, tangible assets, intangible assets, investment assets, and other noncurrent assets have significantly positive impact on firm value. However, performance variables such as net income, operating income, and operating cash flows are negatively associated with business value at the 1% significance level. The results of this study show that the asset element on the balance sheet has a more positive effect on the increase in corporate value than the profitability and performance variables on the income statement and the cash flow statement. The empirical evidence of this study suggests that asset elements should be regarded as major corporate value related variables in Korean stock market. This study also suggests that intangible assets are the most important factors among accounting information should be considered in evaluating firm value. Keywords: Valuation impact; Asset elements; Assets Elements 1. INTRODUCTION In the past decades, there have been many studies on the usefulness of accounting information (Easton and Harris, 1991; Barth et al., 1997; Collins, Maydew, and Weiss, 1997; Han, 1998; Brown et al., 1999; Lev and Zarowin, 1999; Schipper, 1999; Zarowin, 1999; Blair and Wallman, 2001; Hand, 2001a, 2001b; Lee, 2009). Some of these studies argue that the usefulness of accounting information has been seriously degraded, as the accounting system does not properly reflect changes in the economic environment. Others have reported the contradictory result that the usefulness of accounting information has increased. For example, Lev and Zarowin (1999) argue that the usefulness of accounting information is deteriorating, and this is one of the causes of the change in management environment. Brown et al. (1999) documents the change in the value relevance of accounting information is really happened. Moreover, Blair and Wallman (2001) argue that overall corporate value relevance of accounting information has declined over the last decades. Han (1998) reports that the usefulness of accounting information has deteriorated in the Republic of Korea. However, unlike these studies, Collins, Maydew, and Weiss (1997) report that the combined value relevance of accounting earnings and book value increased over the past 40 years and that these findings are contrary to previous studies. They argue that the value relevance of accounting earnings decline with time, while the value relevance of capital increases with time. Francis and Schipper (1999) also report that, as the period elapsed, the value relevance of profits decreased, while the value relevance of book value of equity * Department of Business Administration and Accounting, Hanbat National University San 16-1, Duckmyoung-Dong, Yuseong-Gu, Daejeon 305-719, Republic of Korea (South Korea) Corresponding author. Tel.: +821095446817, E- mail address: geejunga@hanmail.net
2. INTERNATIONAL CONFERENCE STARTUP AND INNOVATION NATION 245 did not decrease. In Korea, Lee (2009) argues that the value relevance of accounting information after the financial crisis of 1997 has increased compared to before. Previous research that analyzes whether the value relevance of accounting information has changed has argued that the value relevance of accounting information is changing because the accounting system does not adequately reflect changes in the environment. However, most of these studies have focused on accounting earning, operating income, and cash flows, which are components of profit and loss statements and cash flow statements. Relatively little researches have been conducted on the components of assets on the balance sheet. However, the assets shown on the balance sheet may vary in extent to reflect changes in the environment, depending on the nature of the components. Additionally, in terms of future cash generating ability, which determines corporate value, it can be expected that each asset category will show a difference. Therefore, it can be assumed that the value relevance of accounting information will vary depending on the components of assets. This study analyzes whether there is a difference in the value relevance of accounting information according to the asset composition, which is information on the balance sheet. Although there are prior studies analyzing the difference in the value relevance of accounting information according to stability, represented by the debt ratio, there is few studies analyzing the difference in the value relevance of accounting information according to asset elements in the balance sheet. This study classifies asset items into current assets, noncurrent assets, quick current assets, inventory assets, tangible assets, intangible assets, investment assets, and other noncurrent assets according to the asset element of domestic listed companies in Korean stock markets. In particular, this study analyzes the effects of the components of assets on corporate value by classifying them according to the stock market, size of company, and technology level. Through this analysis, this study verifies how the value relevance of asset elements varies depending on the nature of the firm. Analysis results show that every asset element such as current assets, noncurrent assets, quick current assets, inventory assets, tangible assets, intangible assets, investment assets, and other noncurrent assets have significantly positive impact on firm value. However, performance variables such as net income, operating income, and operating cash flows are negatively associated with business value at the 1% significance level. The results of this study show that the asset element on the balance sheet has a more positive effect on the increase in corporate value than the profitability and performance variables on the income statement and the cash flow statement. The empirical evidence of this study suggests that asset elements should be regarded as major corporate value related variables in Korean stock market. This study also suggests that intangible assets are the most important factors among accounting information should be considered in evaluating firm value. This paper is composed as follows. Chapter 2 reviews the previous research, which is the theoretical background of this study. Chapter 3 explains the methodology of this study. Chapter 4 presents the results of the empirical analysis. Finally, the summary and conclusion of this study are presented in Chapter 5. 2. Literature Review Over the past several decades, much research has been conducted on the value relevance of accounting information. However, most of these studies have focused on analyzing the value relevance of profitability and performance variables on the income statement and the cash flow statement. However, there is little analysis of the value relevance of accumulated asset elements on the balance sheet. In this section, this paper reviews some of the major studies on the value relevance of accounting information so far.
3. 246 HỘI THẢO KHOA HỌC QUỐC TẾ KHỞI NGHIỆP ĐỔI MỚI SÁNG TẠO QUỐC GIA First, Easton and Harris (1991) analyze whether accounting earning and book value have complementary value relevance. Weight of book value is lower when the weight is high for the verification results, and the results are similar for the opposite cases. In addition, the weight of profit is larger when the persistence of profit is larger, and the weight of book value is larger when the persistence of profit is smaller. This is because the value relevance of accounting earnings has decreased. The explanatory power of the book value on the balance sheet has increased rather than the decrease in the value relevance of accounting information due to changes in the industrial environment. Barth et al. (1997) argues that as the firm’s financial soundness deteriorated, the pricing multiples and additional explanatory power of the book value increased and the pricing multiple of accounting earnings and the additional explanatory power decreased. In this study, the financial soundness of the bond is determined by the credit rating of the bond. Collins et al. (1999) have shown that accounting earning is the dominant determinant of firm value for profit firms, while book value is the dominant determinant for loss firms. This is because the book value of the liquidation value is relatively more important than the accounting earnings because it is more likely to liquidate the business, reporting the loss. Book value is used as a surrogate for expected future normal earnings in the case of profit reporting companies and in the case of loss reporting firms as a substitute for liquidation value. Anderson and Alexandros (1999) also argue that investment in intangible assets indirectly increases the value of tangible assets and contributes significantly to ensuring debt repayment capacity and cash liquidity. Choi, Kwon & Lobo (2000) report that the intangible asset value reported in the balance sheet is related to the enterprise value. Hand (2001a) focused on the biotechnology industry and analyzed the value relevance of R&D investment, the growth rate of R&D investment, the size of R&D investment, the value of human assets, and the history of the company. According to his empirical analysis, the relationship between corporate value and accounting information in the biotechnology industry is not linear, unlike manufacturing firms. In addition, he showed that research and development expenditure and its growth rate showed a significant positive correlation with corporate value, while corporate history and human resources did not affect corporate value increase. Additionally, Hand (2001b) reports that the PB ratio is increasing due to the increase in R&D investment in technology, the growth of the US economy, and the stock market surge. R&D investment continued to increase in the 1990s compared to the 1980s, while investment in advertising and tangible assets continued to decline in the 1990s compared to the 1980s. Jung et al. (2003) analyzes whether there is a difference in the usefulness of accounting information related to research and development expenses between the information and communication industry with high R&D concentration and the companies belonging to the non-information and communication industry. According to their research results, in the case of non-information and telecommunication companies, only the development cost information processed by the assets showed value relevance. However, both the processed ordinary development cost information and the development cost information processed by assets showed a positive correlation with the enterprise value. They also report that, in the case of companies belonging to the information and communication industry, the explanatory power of the enterprise value of profit and book value was significantly increased in the case of capitalization compared to the case of the ordinary development cost. Baek (2003) analyzes the industry-specific differences in the value relevance of R&D expenditures. He points out that the relationship between R&D expenditure and stock price is significantly positive in information and communication technology firms, but not in non-financial manufacturing firms.
4. INTERNATIONAL CONFERENCE STARTUP AND INNOVATION NATION 247 Baek and Jeong (2004) analyze the effect of capitalization of intangible asset expenditures on the value relevance of these expenditures. As a result of the analysis, it is found that the continuous coefficient of excess profit calculated by capitalization of intangible asset expenditure is larger than the continuous coefficient of excess profit calculated by costing the expenditure. As a result of analyzing the relationship between intangible assets and other items in the balance sheet, Jung et al. (2004) report that intangible assets are not as relevant as other items. However, per the detailed analysis of intangible assets, it is reported that there is a difference in enterprise value relevance by item. Kwon and Choi (2005) verify that accounting earning is the main variable explaining firm value in the KOSDAQ capital market, while book value of loss firms is a better explanatory variable of firm value. Additionally, they report empirical results that the value relevance of accounting earnings and book value differs depending on the size of the firm and the debt ratio. Kim, et al., (2006) analyze the value relevance of tangible assets, investment assets, and intangible assets in listed manufacturing industries. They report that tangible assets, investment assets, and intangible assets all have a significantly positive (+) impact on firm value. Kim et al., (2009) analyze the value relevance of accounting information, focusing on the asset composition ratio of the balance sheet among the financial characteristics of publicly traded manufacturing companies. In the case of liquid assets ratio, firms with a bigger median value had a negative and those with a median value had a positive effect. For investment assets, tangible and intangible assets, the positive effect of firm is also analyzed. They argue that liquidity improves as the liquidity ratio increases, but profitability may deteriorate as the proportion of noncurrent assets such as investment assets, tangible assets, and intangible assets increases. 3. HYPOTHESES AND RESEARCH MODEL 3.1 Research Hypotheses The purpose of this study is to analyze the value relevance of asset elements, which has been neglected in the valuation research sector so far. This study divides the components of assets into current assets, noncurrent assets, quick current assets, inventory assets, tangible assets, intangible assets, investment assets, and other noncurrent assets and analyzes the value relevance of each asset element. To this end, this study attempts to set the following hypothesis. H1: The current assets are significantly related to the enterprise value in the Korean capital market. H2: The noncurrent assets are significantly related to the enterprise value in the Korean capital market. H3: The quick current assets are significantly related to the enterprise value in the Korean capital market. H4: The inventory assets are significantly related to the enterprise value in the Korean capital market. H5: The tangible assets are significantly related to the enterprise value in the Korean capital market. H6: The intangible assets are significantly related to the enterprise value in the Korean capital market. H7: The investment assets are significantly related to the enterprise value in the Korean capital market. H8: The other noncurrent assets are significantly related to the enterprise value in the Korean capital market. 3.2. Empirical Model This study uses the Olson (1995) valuation model to analyze the value relevance of asset elements, such as current assets, noncurrent assets, quick current assets, inventory assets, tangible assets, intangible assets, investment assets, and other noncurrent assets. Figure 1 shows the conceptual framework of this study.
5. 248 HỘI THẢO KHOA HỌC QUỐC TẾ KHỞI NGHIỆP ĐỔI MỚI SÁNG TẠO QUỐC GIA Figure 1. Conceptual Framework To analyze the value relevance of asset elements, this study modifies the Olson (1995) model as follows and verifies the hypothesis of this study. (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12)
6. Here, MVi,t=market value of equity 3 months after in year t, Li,t=book value of liability in the end of year t; CUi,t=book value of currents assets in the end of year t; NCUi,t=book value of noncurrent assets in the end of year t; ONCUi,t=book value of other noncurrent assets in the end of year t; QUi,t=book value of quick currents assets in the end of year t; INi,t=book value of inventory in the end of year t; TAi,t=book value of tangible assets in the end of year t; INTAi,t=book value of intangible assets in the end of year t; INVi,t= book value of investment assets in the end of year t; Si,t=total sales in period t; NIi,t=net income in period t; OIi,t=operating income in period t; CFi,t=total cash flows in period t; OCFi,t=operating income in period t; =error term. The research equations assume linear functions between dependent and independent variables, and all variables are standardized by total sales in period t. To examine precise influence of asset elements on firm value, this paper splits sample data into various subgroups according to characteristics of individual companies. 4. EMPIRICAL ANALYSIS 4.1 Sample Selection The sample used in the empirical analysis of this study is restricted to companies that meet the following requirements targeting public companies listed in the database of the KIS-VALUE Korea Investors Service Inc. from 2000 to 2015. (1) It should be a settlement corporation at the end of December. (2) It will not be included in the financial sector, including banking, investment banking, securities, and insurance. This is because the financial industry is largely different from other industries in terms of sales activities, financial structure, or accounting policies. Therefore, the sample companies included in this study include the food, construction, and transportation industries, while focusing on the manufacturing industry. (3) It has never been incorporated into the management subject matter during the sample period. This requirement is due to the continuity of the data because the stocks classified as managed stock tend to be sluggish or even suspended for a certain period. (4) All data necessary for empirical analysis should be available. (5) It has Cook’s Distance smaller than 0.5 and absolute value of studentized residuals smaller than 1. Table 1. Sample data selection Sample companies from KIS-VALUE DB over the period from 2000 to 2015 (firm-year) 35,040 Minus (-): 19,770 Companies that are not finalized at the end of December Companies not in the financial industry (banking, investment, insurance) Companies that are not subject to stock exchange management Companies whose capital has not been impaired Companies that cannot obtain financial data from the KIS-VALUE DB Total sample Companies (firm-year) 15,270
7. 250 HỘI THẢO KHOA HỌC QUỐC TẾ KHỞI NGHIỆP ĐỔI MỚI SÁNG TẠO QUỐC GIA 4.2. Empirical Results 4.2.1 Descriptive Statistics Table 2 shows descriptive statistics of dependent and independent variables of this study. Table 2. Descriptive statistics of variables Number of Standard Variable Median Minimum Maximum samples Deviation 2.4234 18.5816 0.0186 1,611.9500 1.6718 12.1386 0.00184 1036.0000 1.3204 31.3437 0.0006 3,754.9900 0.8158 6.2262 0.0112 458.4562 1.1142 10.2583 0.0053 736.0194 0.6552 5.4213 0.0107 441.9642 0.1606 1.1398 0.0000 81.7080 15,270 0.5560 5.7736 0.0000 570.5005 0.0619 0.3527 0.0000 21.9199 0.4460 6.0709 0.0000 480.9371 0.0503 0.3525 0.0000 33.5896 -0.0035 1.1213 -30.9292 101.9306 0.0132 0.6400 -29.6971 60.3915 0.0299 0.2113 -8.3295 1.0000 0.0653 1.0561 -14.4442 68.8339 Note. MVi,t=market value of equity 3 months after in year t, Li,t=book value of liability in the end of year t; CUi,t=book value of currents assets in the end of year t; NCUi,t=book value of noncurrent assets in the end of year t; QUi,t=book value of quick currents assets in the end of year t; INi,t=book value of inventory in the end of year t; TAi,t=book value of tangible assets in the end of year t; INTAi,t=book value of intangible assets in the end of year t; INVi,t=book value of investment assets in the end of year t; ONCUi,t=book value of other noncurrent assets in the end of year t; Si,t=total sales in period t; NIi,t=net income in period t;
8. INTERNATIONAL CONFERENCE STARTUP AND INNOVATION NATION 251 OIi,t=operating income in period t; CFi,t=total cash flows in period t; OCFi,t=operating income in period t. 4.2.2 Correlation Analysis This paper performs three Pearson correlation analyses on the main variables of research models to predict the degree and directions of value influence. The correlation results can help predict the value influence directions of independent variables before regression analysis. Table 3 presents correlation results between the market value of equity and independent variables, which are used in empirical model 1-4, such as book value of equity, net income, cash flows, operating income, and operating cash flows. The correlation results display that cash flows are negatively correlated to the market value of equity and book value of equity at the 1% level of significance respectively. This study verifies the possibility of multicollinearity that can make the variance of the regression coefficient unstable and difficult to interpret due to the high correlation between the independent variables. The VIF (Variance Inflation Factor) value indicating the possibility of multicollinearity is less than 2.0 in regression analysis of research model 1, 2, 3, and 4; therefore, the possibility of multicollinearity is very low. Table 3. Pearson correlation for variables of model 1-4 Variables 1 0.27236 0.18332 -0.12249 0.48536 0.79675 <.0001 <.0001 <.0001 <.0001 <.0001 1 0.0688 -0.03742 0.14164 0.19792 <.0001 <.0001 <.0001 <.0001 1 0.27753 -0.20761 0.33987 <.0001 <.0001 <.0001 1 0.02923 0.12884 0.0003 <.0001 1 0.32348 <.0001 1 1) Variable definition: refer to Table 2 Table 4 shows correlation results between dependent variable and independent variables, which are included in empirical model 5-8, such as book value of equity, current assets, noncurrent assets, cash flows, operating income, and operating cash flows. The results show current and noncurrent assets are positively correlated to other variables except operating income at the 1% level of significance respectively. In Study Model 6, the VIF value is less than 7.0 and in Study Models 7 and 8, the VIF value is less than 2.0. This means that the likelihood of multiple collinearity among the variables used in study models 6, 7, and 8 is low. Table 4. Pearson correlation for variables of model 5-8 Variables 1 0.94064 0.90782 0.19947 -0.09386 0.51426 0.86742 <.0001 <.0001 <.0001 <.0001 <.0001 <.0001
9. 252 HỘI THẢO KHOA HỌC QUỐC TẾ KHỞI NGHIỆP ĐỔI MỚI SÁNG TẠO QUỐC GIA 1 0.90794 0.40149 -0.07045 0.42398 0.85534 <.0001 <.0001 <.0001 <.0001 <.0001 1 0.35822 -0.04604 0.47874 0.81815 <.0001 <.0001 <.0001 <.0001 1 0.27753 -0.20761 0.33987 <.0001 <.0001 <.0001 1 0.02923 0.32348 0.0003 <.0001 1 0.12884 <.0001 1 1) Variable definition: refer to Table 2 Table 5 shows correlation results between the dependent variable and independent variables that are included in empirical model 9-12, such as quick current assets, inventory assets, tangible assets, intangible assets, investments assets, other noncurrent assets, net income, cash flows, operating income, and operating cash flows. The result shows that operating income is negatively correlated to dependent variable and independent variables of asset elements. Moreover, cash flow has negative correlations with intangible assets and investment assets at the 1% level of significance respectively. All VIF values are below 2.0 in research models 9, 10, 11, and 12.0; this means that the likelihood of multicollinearity among the variables used in models 9, 10, 11, and 12 is very low. Table 5. Pearson correlation for variables of model 9-12 Variables 1 0.94113 0.66185 0.74724 0.53934 0.77565 0.28154 0.19947 -0.09386 0.51426 0.86742 <.0001 <.0001 <.0001 <.0001 <.0001 <.0001 <.0001 <.0001 <.0001 <.0001 1 0.65342 0.67759 0.47538 0.87079 0.2439 0.37893 -0.07207 0.47086 0.82938 <.0001 <.0001 <.0001 <.0001 <.0001 <.0001 <.0001 <.0001 <.0001 1 0.54976 0.48817 0.41219 0.19778 0.39079 -0.04206 0.07641 0.72747 <.0001 <.0001 <.0001 <.0001 <.0001 <.0001 <.0001 <.0001 1 0.34334 0.42789 0.19725 0.28494 -0.00819 0.22626 0.8016 <.0001 <.0001 <.0001 <.0001 <.0001 <.0001 <.0001 1 0.26055 0.19192 0.07884 -0.29037 -0.00986 0.42595 <.0001 <.0001 <.0001 <.0001 <.0001 <.0001 1 0.33441 0.32499 -0.04831 0.59522 0.58389 <.0001 <.0001 <.0001 <.0001 <.0001 1 0.08151 -0.0832 -0.01504 0.19754 <.0001 <.0001 0.0632 <.0001 1 0.27753 -0.20761 0.33987 <.0001 <.0001 <.0001 1 0.02923 0.32348 0.0003 <.0001
10. INTERNATIONAL CONFERENCE STARTUP AND INNOVATION NATION 253 1 0.12884 <.0001 1 1) Variable definition: refer to Table 2 4.2.3 Tests on the Value Influence of Book Value and Performance Variables: Model 1, 2, 3, 4 Before testing the impact of asset elements on business value, this study examines the influence of performance variables such as net income, operating income, cash flows, and operating cash flows in listed Korean Stock Markets over the period of 2000-2015. Table 6 presents net income, cash flows, and operating cash flows are positively related to market value of equity while operating income has a negative relationship with dependent variable at the 1 % level of significance. Table 6. The Value Influence of Book Value and Performance Variables Variables Total Sample (15,270 firm-year: 2000-2015) & Expected Sign Expected Variables Model 1 Model 2 Model 3 Model 4 Sign Intercept ? 1.68571 1.87363 1.66089 1.69987 + 0.75057 0.61460 0.63226 0.54640 + 0.61634 + -2.3288 + 2.80857 + 0.48193 ΣYD Included Included Included Included ΣIND Included Included Included Included F Value 663.52 251.42 243.43 239.58 Adj R-Sq 0.4892 0.2657 0.2596 0.2571 Number of sample used 15,222 15,226 15,209 15,165 1) Variable definition: refer to Table 2 2) Model 1: , 3) Model 2: , 4) Model 3: , 5) Model 4: 6) Sample data used in this test are after excluding samples that have Cook’s Distance greater than 0.5 and absolute value of studentized residuals greater than 1. 7) *: p < 0.1, : p < 0.05, : p < 0.01 4.2.4 Tests on the Value Influence of Asset elements: Current and Noncurrent assets This study investigates the value influence of asset elements such as current and noncurrent assets. Table 7 shows that current and noncurrent assets have a positive association with dependent variable at the
11. 254 HỘI THẢO KHOA HỌC QUỐC TẾ KHỞI NGHIỆP ĐỔI MỚI SÁNG TẠO QUỐC GIA 1 % level of significance, whereas net income, operating income, and operating cash flows are negatively related to the dependent variable. In all of the analytical models 5 through 8, current assets show higher value relevance than noncurrent assets. In addition, current assets also show higher value relevance than accounting earnings, operating income, cash flows, and operating cash flows. Table 7. The value influence of current and noncurrent assets: Total sample Variables Total Sample (15,270 firm-year: 2000-2015) & Expected Sign Variables Expected Sign Model 5 Model 6 Model 7 Model 8 Intercept ? 0.88226 0.89420 1.08877 1.00048 + 1.99833 0.02255 1.75463 1.66885 + 0.55537 0.01034 0.54239 0.68586 + -1.47564 + -1.05113 + 1.35220 + -0.25187 ΣYD Included Included Included Included ΣIND Included Included Included Included F Value 33,143.9 1,158.06 9,221.05 1060.19 Adj R-Sq 0.9805 0.6366 0.9332 0.6163 Number of sample used 15,147 15,191 15,183 15,167 1) Variable definition: refer to Table 2 2) Model 5: , 3) Model 7: , 4) Model 6: 5) Model 8: 6) Sample data used in this test are after excluding samples that have Cook’s Distance greater than 0.5 and absolute value of studentized residuals greater than 1. 7) *: p < 0.1, : p < 0.05, : p < 0.01 Table 8 shows the results of analyzing the relationship between the value of current assets and the value of noncurrent assets according to the stock market (KOSPI vs. KOSDAQ). The KOSPI market is Korea’s first stock market opened in 1956. It is the oldest stock market in Korea, the standard of listing is tricky, and stocks of large and excellent corporations are being traded. KOSDAQ (Korea Securities Dealers Automated Quotations) is a Korean stock market established in 1996. It is a benchmark of the Nasdaq (NASDAQ) market, centered on high technology stocks, and is a market in which regulatory measures are separate from the securities market. The creation of the KOSDAQ was established to allow Small & Medium firms and venture companies to better finance their business in the stock market.
12. INTERNATIONAL CONFERENCE STARTUP AND INNOVATION NATION 255 The R-square, which indicates the extent to which independent variables explain the dependent variable, is between 0.55 and 0.59 in the KOSPI group and 0.60 to 0.65 in the KOSDAQ group. All independent variables have a statistically significant relationship with firm value at the 1% significance level. In particular, current assets have a higher impact on firm value than noncurrent assets in both the KOSPI and KOSDAQ groups, and show higher value relevance than performance variables such as accounting earnings, operating income, cash flows and operating cash flows. Table 8. The value influence of current and noncurrent assets: KOSPI vs. KOSDAQ Variables Total Sample (15,270 firm-year) & Expected Sign KOSPI Market(6,979 firm-year) KOSDAQ Market(8,291 firm-year) Expected Variables Model 5 Model 6 Model 7 Model 8 Model 5 Model 6 Model 7 Model 8 Sign Intercept ? 0.72953 0.76410 0.80420 0.84938 1.09550 2.01151 1.09036 2.04906 + 1.17339 1.26415 1.20096 1.17267 1.87724 1.62282 1.79405 1.56604 + 0.76313 0.74176 0.70541 0.74483 0.71212 0.06092 0.80143 0.12505 + -0.71620 -1.08450 + -0.03053 -2.77187 + 1.23813 0.94376 + -0.72541 0.25076 ΣYD ΣIND F Value 430.55 402.50 397.40 382.34 609.4 640.58 546.10 556.03 Adj R-Sq 0.5876 0.5704 0.5671 0.5575 0.6306 0.6422 0.6046 0.6089 Number of sample used 6,936 6,956 6,962 6,962 8,195 8,197 8,200 8,201 1) Variable definition: refer to Table 2 2) Model 5: , 3) Model 7: , 4) Model 6: 5) Model 8: 6) Sample data used in this test are after excluding samples that have Cook’s Distance greater than 0.5 and absolute value of studentized residuals greater than 1. 7) *: p < 0.1, : p < 0.05, : p < 0.01 Table 9 shows the results of analyzing the corporate value relevance of current assets and noncurrent assets by the size of the firm (Big vs. Small & Medium). Here, Big companies should be larger than the size of Small & Medium companies stipulated by the Basic Law of Small & Medium Enterprises, and there should be nothing corresponding to the Act on Promotion of Medium-Sized Enterprises Growth. However, the financial and insurance businesses are considered to be large corporations even if they are not limited to cross-shareholding companies, if they are outside the scope of the Basic Act for Small and Medium Enterprises. All other companies are regarded as Small & Medium Enterprises.
13. 256 HỘI THẢO KHOA HỌC QUỐC TẾ KHỞI NGHIỆP ĐỔI MỚI SÁNG TẠO QUỐC GIA The R-square, which indicates the extent to which independent variables explain the dependent variable, is between 0.630 and 0.993 in the Big firm group and 0.630 to 0.650 in the Small & Medium company group. Similar to the results in Table. 8, all independent variables have a statistically significant relationship with firm value at the 1% significance level. In particular, current assets have a higher impact on firm value than noncurrent assets in both the Big firm and Small & Medium company groups, and show higher value relevance than performance variables such as accounting earnings, operating income, cash flows and operating cash flows. Table 9. The value influence of current and noncurrent assets: Big firm vs. Small & Medium firm Variables Total Sample (15,270 firm-year) & Expected Sign Big firm (8,837 firm-year) Small & Medium firm (6,433 firm-year) Expected Variables Model 5 Model 6 Model 7 Model 8 Model 5 Model 6 Model 7 Model 8 Sign Intercept ? 0.52266 0.28851 0.70413 0.83153 0.80649 0.81334 0.71729 0.74607 + 2.09035 1.69296 1.51411 1.03500 2.24347 2.26236 2.35028 2.32484 + 0.46993 0.77293 0.56011 0.43733 0.99687 1.01503 1.05622 1.02935 + -1.35103 -0.51553 + 2.02302 -0.64922 + 2.04796 0.24321 + 3.74391 -0.52447 ΣYD ΣIND F Value 51563.8 35281.9 1058.54 1366.07 486.89 486.81 538.69 494.26 Adj R-Sq 0.9926 0.9892 0.7339 0.7808 0.6375 0.6376 0.6605 0.6410 Number of sample used 8,804 8,819 8,821 8,814 6,355 6,353 6,357 6,356 1) Variable definition: refer to Table 2 2) Model 5: , 3) Model 7: , 4) Model 6: 5) Model 8: 6) Sample data used in this test are after excluding samples that have Cook’s Distance greater than 0.5 and absolute value of studentized residuals greater than 1. 7) *: p < 0.1, : p < 0.05, : p < 0.01 Table 10 shows the results of analyzing the corporate value relevance of current assets and noncurrent assets by company’s technology level (High technology vs. Low technology). In this study, the distinction criteria between high technology and low technology follow the classification standard of Himmelberg and Petersen (1994). Himmelberg and Petersen (1994) classify chemical, pharmaceutical, machinery, electrical equipment, and telecommunications industries into high-tech industries, while all other industries are classified as low technology industries.
14. INTERNATIONAL CONFERENCE STARTUP AND INNOVATION NATION 257 The R-square, which indicates the extent to which independent variables account for dependent variables, is between 0.62 and 0.66 for the High technology group and between 0.67 and 0.99 for the Low technology group. Similar to the results in Table 8 and Table 9, all of the independent variables show a statistically significant relationship with the firm value at the 1% significance level. In particular, current assets have a higher impact on corporate value than noncurrent assets in both high technology and low technology groups, showing higher value relevance than accounting variables such as accounting earnings, operating income, cash flows and operating cash flows. Table 10. The value influence of current and noncurrent assets: High-Tech firm vs. Low-Tech firm Variables Total Sample (15,270 firm-year) & Expected Sign High-Tech firm (7,501 firm-year) Low-Tech firm (7,769 firm-year) Expected Variables Model 5 Model 6 Model 7 Model 8 Model 5 Model 6 Model 7 Model 8 Sign Intercept ? 0.45483 0.33550 0.37022 0.39924 0.82150 0.91330 1.16540 1.17689 + 2.51114 2.52692 2.42027 2.48744 2.03677 1.78431 1.64579 1.34521 + 0.97562 1.03838 0.98938 1.04751 0.51170 0.67574 0.52458 0.68799 + -1.22987 -1.34356 + -0.17750 -0.60303 + 1.00835 0.88456 + -0.68919 -0.13040 ΣYD ΣIND F Value 663.19 599.15 667.24 615.54 32752.0 18,564.8 786.56 707.82 Adj R-Sq 0.6520 0.6287 0.6533 0.6349 0.9899 0.9822 0.7001 0.6777 Number of sample used 7,423 7,420 7,425 7,423 7,720 7,747 7,741 7,731 1) Variable definition: refer to Table 2 2) Model 5: , 3) Model 7: , 4) Model 6: 5) Model 8: 6) Sample data used in this test are after excluding samples that have Cook’s Distance greater than 0.5 and absolute value of studentized residuals greater than 1. 7) *: p < 0.1, : p < 0.05, : p < 0.01 4.2.4 Tests on the Value Influence of Current and Noncurrent Asset elements: Quick current assets, Inventory Assets, Tangible Assets, Intangible Assets, Investment Assets, Other Noncurrent Assets This paper examines the value influence of asset elements such as quick current assets, inventory assets, tangible assets, intangible assets, investment assets, and other noncurrent assets. Table 11 displays that every asset element has the positive association with the dependent variable at the 1 % level of significance in every model (9-12). Similar to the results of Tables 8, 9 and 10, Accounting earnings, operating income, and operating cash flows are negatively related to the dependent variable.
15. 258 HỘI THẢO KHOA HỌC QUỐC TẾ KHỞI NGHIỆP ĐỔI MỚI SÁNG TẠO QUỐC GIA The results show that intangible assets among the various components of assets have the greatest effect on firm value, followed by quick current assets, other noncurrent assets, inventory assets, intangible assets, and investment assets. Table 11. The value influence of quick current assets, inventory assets, tangible assets, intangible assets, investment assets, and other noncurrent assets: Total sample Variables Total Sample (15,270 firm-year) & Expected Sign Variables Expected Sign Model 9 Model 10 Model 11 Model 12 Intercept ? 0.74707 0.68311 0.49715 0.77266 + 1.73680 1.90763 2.04353 1.62471 + 0.89802 0.87486 0.99503 0.55956 + 0.86998 0.92194 0.84905 0.88944 + 3.83239 4.95752 4.66185 5.26066 + 0.45648 0.42164 0.38273 0.51502 + 1.74513 1.00952 1.22433 1.55368 + -0.89042 + -0.06466 + 1.85971 + -0.02243 ΣYD Included Included Included Included ΣIND Included Included Included Included F Value 1,160.27 4107.08 1180.14 1454.11 Adj R-Sq 0.6742 0.8795 0.6780 0.7212 Number of sample used 15,129 15,186 15,119 15,165 1) Variable definition: refer to Table 2 2) Model 9: 3) Model 10: 4) Model 11: 5) Model 12: 6) Sample data used in this test are after excluding samples that have Cook’s Distance greater than 0.5 and absolute value of studentized residuals greater than 1. 7) *: p < 0.1, : p < 0.05, : p < 0.01 Table 12 shows the results of analyzing the corporate value relevance of the quick current assets, the inventory assets, the tangible assets, the intangible assets, the investment assets, and other noncurrent assets according to the stock market (KOSPI vs. KOSDAQ). The R-square, which indicates the extent to which independent variables explain the dependent variable, is between 0.66 and 0.68 in the KOSPI group and 0.75 to 0.78 in the KOSDAQ group. Most of the independent variables show a statistically significant relationship with the firm value at the 1% significance level. In particular, intangible assets have a higher impact on corporate value than
16. INTERNATIONAL CONFERENCE STARTUP AND INNOVATION NATION 259 other assets in both the KOSPI and KOSDAQ groups and show higher value relevance than performance variables such as accounting earnings, operating income, cash flows and operating cash flows. In the KOSPI group, intangible assets have the largest effect on firm value, followed by other noncurrent assets, quick current assets, investment assets, tangible assets, and inventory assets. The KOSDAQ group also shows the largest impact of intangible assets on firm value, followed by quick current assets, tangible assets, inventory assets, and other noncurrent assets. Table 12. The value influence of quick current assets, inventory assets, tangible assets, intangible assets, investment assets, and other noncurrent assets: KOSPI vs. KOSDAQ Variables Total Sample (15,270 firm-year) & Expected Sign KOSPI Market(6,979 firm-year) KOSDAQ Market(8,291 firm-year) Expected Variables Model 9 Model 10 Model 11 Model 12 Model 9 Model 10 Model 11 Model 12 Sign Intercept ? 0.58991 0.54106 0.56174 0.57733 0.73542 0.81810 0.81079 0.91046 + 1.16137 1.17396 1.12486 1.17299 1.92486 1.77432 1.70362 1.79591 + 0.56300 0.62260 0.50566 0.61062 0.66451 0.86041 0.88546 0.75205 + 0.70340 0.68617 0.73377 0.63862 1.02593 1.05340 1.05096 1.05396 + 4.14646 4.33432 3.95001 4.25167 5.27547 5.56279 5.50492 5.27779 + 0.74362 0.74988 0.79132 0.71356 0.49053 0.58121 0.61698 0.49379 + 2.28052 2.51638 2.30267 2.51527 0.09452 -0.44538 -0.15251 -0.03709 + -0.18786 -0.61674 + 0.52247 -0.04347 + -0.63132 0.93179 + 0.08788 -1.11783 ΣYD ΣIND F Value 515.89 522.09 529.49 505.29 1002.88 1057.51 921.46 1077.11 Adj R-Sq 0.6675 0.6701 0.6734 0.6629 0.7676 0.7767 0.7520 0.7799 Number of sample used 6,925 6,927 6,921 6,925 8193 8,200 8,195 8,202 1) Variable definition: refer to Table 2 2) Model 9: 3) Model 10: 4) Model 11: 5) Model 12: 6) Sample data used in this test are after excluding samples that have Cook’s Distance greater than 0.5 and absolute value of studentized residuals greater than 1. 7) *: p < 0.1, : p < 0.05, : p < 0.01 Table 13 shows the results of analyzing the firm value relevance of the quick current assets, the inventory assets, the tangible assets, the intangible assets, the investment assets, and other noncurrent assets according to the firm size (Big firm vs. Small & Medium firm). The R-square value, which indicates the extent to which independent variables explain the dependent variable, is between 0.63 and 0.95 in the Big firm group and 0.76 to 0.77 in the Small & Medium firm group. All independent variables have a statistically significant relationship with firm value at the1%
17. 260 HỘI THẢO KHOA HỌC QUỐC TẾ KHỞI NGHIỆP ĐỔI MỚI SÁNG TẠO QUỐC GIA significance level. Particularly, intangible assets have a higher impact on firm value than other assets in both the Big firm and the Small & Medium firm group, and show higher value relevance than the performance variables accounting earnings, operating income, cash flows and operating cash flows. In the Big firm group, the effect of intangible assets on firm value is the largest, followed by quick current assets, other noncurrent assets, inventory assets, tangible assets, and investment assets. As in Big companies, Small & Medium firm groups have the largest impact on firm value of intangible assets, followed by quick current assets, other noncurrent assets, tangible assets, investment assets and inventory assets. Table 13. The value influence of quick current assets, inventory assets, tangible assets, intangible assets, investment assets, and other noncurrent assets: Big firm vs. Small & Medium firm Variables Total Sample (15,270 firm-year) & Expected Sign Big firm (8,837 firm-year) Small & Medium firm (6,433 firm-year) Expected Variables Model 9 Model 10 Model 11 Model 12 Model 9 Model 10 Model 11 Model 12 Sign Intercept ? 0.49812 0.32027 0.12341 0.40798 0.76715 0.72592 0.69283 0.79257 + 1.44736 1.53483 2.12888 1.19827 2.19110 2.19561 2.15674 2.21714 + 1.30739 1.45816 0.70501 1.09317 0.44174 0.71607 0.71609 0.45976 + 0.85826 1.02413 0.86304 0.85350 0.90729 0.90002 0.91143 0.89898 + 2.40703 4.03930 5.33513 3.85304 4.70365 4.77592 4.76771 4.67629 + 0.45192 0.39568 0.36108 0.63953 0.71065 0.75448 0.78347 0.71335 + 1.31098 0.80133 1.14665 1.19810 1.74968 2.08985 2.18787 1.61235 + 0.18795 -0.29978 + 2.02937 0.04246 + 2.31352 0.40319 + 1.63656 -0.53000 ΣYD ΣIND F Value 876.92 6138.72 554.79 764.79 768.80 765.55 772.26 782.57 Adj R-Sq 0.7291 0.9495 0.6304 0.7007 0.7653 0.7645 0.7661 0.7685 Number of sample used 8,787 8,816 8,766 8,808 6,359 6,359 6,360 6,358 1) Variable definition: refer to Table 2 2) Model 9: 3) Model 10: 4) Model 11: 5) Model 12: 6) Sample data used in this test are after excluding samples that have Cook’s Distance greater than 0.5 and absolute value of studentized residuals greater than 1. 7) *: p < 0.1, : p < 0.05, : p < 0.01 Table 14 shows the results of analyzing the impact of quick current assets, inventory assets, tangible assets, investment assets, and other noncurrent assets on firm value according to firm’s technology level (High-Tech firm vs. Low-Tech firm).
18. INTERNATIONAL CONFERENCE STARTUP AND INNOVATION NATION 261 The R-square value, which indicates the extent to which the independent variables account for the dependent variables, is between 0.69 and 0.71 in the High technology group and between 0.77 and 0.78 in the Low technology group. The result indicate that there is a statistically significant relationship between the independent variables and the firm value at the significance level of 5% or 1%. In particular, intangible assets have the highest impact on corporate value among other assets components in both the high technology group and the low technology group, and show higher value relevance than the performance variables accounting earnings, operating income, cash flows, and operating cash flows. In the high technology group, intangible assets have the largest effect on firm value, followed by quick current assets, other noncurrent assets, tangible assets, and investment assets, and inventory assets. As with the high technology group, the low technology group has the largest impact on the firm value of intangible assets, followed by quick current assets, other assets, other assets, and noncurrent assets. Table 14. The value influence of quick current assets, inventory assets, tangible assets, intangible assets, investment assets, and other noncurrent assets: High-Tech firm vs. Low-Tech firm Variables Total Sample (15,270 firm-year) & Expected Sign High-Tech firm( 7,501 firm-year) Low-Tech firm (7,769 firm-year) Expected Variables Model 9 Model 10 Model 11 Model 12 Model 9 Model 10 Model 11 Model 12 Sign Intercept ? 0.40098 0.35209 0.35177 0.37706 0.94810 0.88334 0.60109 0.90853 + 2.43126 2.44185 2.34599 2.46902 1.61265 1.66573 1.65943 1.43428 + 0.24797 0.33734 0.42932 0.28927 1.33002 1.47833 1.14120 1.43541 + 0.89176 0.93779 0.95212 0.96165 0.84753 0.90237 0.79184 0.87577 + 4.92770 4.96417 4.95304 4.62586 2.14813 2.91464 4.13105 3.12546 + 0.63604 0.65632 0.65564 0.68218 0.46138 0.48484 0.46301 0.61719 + 1.18561 1.25223 1.17240 0.97324 0.16214 0.40572 3.07091 -0.24837 + -0.14013 -0.61278 + 0.38861 -0.15527* + 0.93142 0.81995 + -0.27875 0.15491 ΣYD ΣIND F Value 666.25 659.25 694.77 720.00 698.39 3,238.57 12,759.4 12556.2 Adj R-Sq 0.6915 0.6892 0.7004 0.7078 0.7096 0.9187 0.9782 0.9777 Number of sample used 7,420 7,423 7421 7,420 7,706 7,741 7,695 7,727 1) Variable definition: refer to Table 2 2) Model 9: 3) Model 10: 4) Model 11: 5) Model 12:
19. 262 HỘI THẢO KHOA HỌC QUỐC TẾ KHỞI NGHIỆP ĐỔI MỚI SÁNG TẠO QUỐC GIA 6) Sample data used in this test are after excluding samples that have Cook’s Distance greater than 0.5 and absolute value of studentized residuals greater than 1. 7) *: p ② Table 16 summarizes the results of analyzing the effects of the quick current assets, the inventory assets, the tangible assets, the intangible assets, the investment assets, and other noncurrent assets on the corporate value according to the stock market, firm size, and technology level. As Table 16 shows, intangible assets have the highest value relevance among assets components in both the total sample and the subgroup samples. Quick current assets have the second highest value relevance among the asset elements except for the KOSPI group. In addition, other noncurrent assets have the third highest value relevance except KOSDAQ and Low-Tech group. Tangible assets and inventory assets are almost similar, with tangible assets at forth and inventory assets at fifth place. Finally, investment assets are ranked fifth or sixth in most subgroups. Table 16. Comparison of the value influence of quick current assets, inventory assets, tangible assets, intangible assets, investment assets, and other noncurrent assets in every sample group Quick Other Inventory Tangible Intangible Sample Group Current Investment Assets Noncurrent Assets Assets Assets Assets Assets Total ② ④ ④ ① ⑥ ③ KOSPI ③ ⑥ ⑤ ① ④ ② KOSDAQ ② ④ ③ ① ⑤ ⑥ Big ② ④ ⑤ ① ⑥ ③ Small & Medium ② ⑥ ④ ① ⑤ ③ High-Tech ② ⑥ ④ ① ⑤ ③ Low-Tech ② ③ ④ ① ⑤ ⑥ * Comparative value relevance degree: ①>②>③>④>⑤>⑥ 5. CONCLUSIONS There have been many studies on the usefulness of accounting information over the past several decades. Some have argued that the usefulness of accounting information has been seriously degraded.
20. INTERNATIONAL CONFERENCE STARTUP AND INNOVATION NATION 263 Other studies have reported inconsistent results that the usefulness of accounting information has increased. However, most of these studies focused on accounting earning, operating income, and cash flow, which are the main components of profit and loss statements and cash flow statements, and are relatively less interested in asset elements on the balance sheet. For this reason, this study examines the effects of asset elements on firm value during the period from 2000 to 2015 for companies listed on the Korean stock market. This study uses the Ohlson (1995) valuation model to examine the main components of assets in the balance sheet: current assets, noncurrent assets, quick current assets, inventories, tangible assets, intangible assets, investment assets, and other noncurrent assets to verify whether there is a significant relationship with the firm value. In particular, this study divides the sample of companies according to the stock market, firm size, and technology level, and try to verify the difference in the value relevance of asset elements depending on the characteristics of the company. The analysis shows that all asset elements, such as current assets, noncurrent assets, quick current assets, inventory assets, tangible assets, intangible assets, investment assets, and other noncurrent assets have a very positive impact on corporate value. However, net income and operating cash flow have a negative correlation with firm value at the 1% significance level. The analysis result of dividing the assets into current assets and noncurrent assets show that the relevance of the corporate value of the current assets in both the overall sample and the subgroup samples are larger than the noncurrent assets. This study also divides the assets into quick current assets, inventory assets, tangible assets, intangible assets, investment assets, and other noncurrent assets, and classifies them according to the stock market, firm size, and technology level. The analysis shows that intangible assets have the highest value relevance in both the overall sample and the subgroup sample. Quick current assets have the second highest value relevance among asset elements except the KOSPI group. Surprisingly, other noncurrent assets have the third highest value relevance except for the KOSDAQ and Low-Tech groups. Tangible assets and inventory assets are almost similar, with tangible assets at forth and inventory assets at fifth place. Finally, investment assets are ranked fifth or sixth in most subgroups. The results of this study show that the asset element on the balance sheet has a more positive effect on the increase in corporate value than the profitability and cash flow performance variables on the income statement and cash flow statement. The empirical evidence of this study suggests that asset elements should be regarded as major corporate value related variables in Korean stock market. This study also suggests that intangible assets are the most important factors among accounting information should be considered in evaluating firm value. The results of this study are significant in that investors provide important information that affects corporate value in investing in Korean companies. However, this study has a limit in that the analytical result should be limited to Korea only by analyzing the sample for the empirical analysis only for the companies listed on the Korean stock market. Therefore, it is necessary to expand the follow-up study to foreign countries such as the US, Japan, and China.
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